Small Business Financing

Funding for a small business

Small business financing can be a frustrating aspect of a business start-up or expansion. It will take some time and energy to convince a lender that your business will bring in enough of a profit to succeed, and that you have enough competence and capability to manage your finances. Whether you are in the market for startup funding to begin your company, or if you're looking for small business equipment financing to expand your company, there is a variety of funding sources available to generate all of the capital you will need.

Advertiser Links forSmall Business Financing
[ what's this?]

Financing a Small Business

Equity financing and debt financing are the two main types of funding for small business; each is characterized by a specific financial source and specific repayment expectations. With equity financing, capital is exchanged for a share of ownership in the business, while debt financing is essentially a loan that will require payment (with interest) over a fixed period of time. Small business start-up financing will depend principally on debt financing from a financial institution, but many entrepreneurs can obtain some equity capital from family, friends and venture capitalists.

Before you pursue small business grants or loans, consider the strength of your management team, your degree of risk and how you intend to use the capital. These are some of the principal aspects that will interest the lender; a loan or grant will go to the business owner who shows the most organization and insight into the function and state of their business. Look over a sample business plan to get an idea of how to assess and organize the needs of your business.

Sources for Start-Up Funding

Financing a small business can be a headache, especially if you discover that you will need more capital than you thought to get your business off the ground. After you contact friends, family and private investors, look to professional institutions and the government for a grant or loan. There are plenty of grants available for businesses that provide an important economic or social service, but commercial small businesses generally must rely on loans.

The Small Business Association, or SBA, is a particularly good source for start-up funding. The SBA offers guaranteed lending programs, which encourage banks and other professional lenders to make long-term loans to small businesses. This means that the funding does not actually come from the SBA, but rather from the lending institution; the SBA serves to back up the loan, in case of your inability to repay. This is appealing to banks, as it reduces the risk attached to your company, and will go far to convince them to lend you the small business capital that you need.