LocalWin.com - Your Local Business Finder

Financing Your Business

biz_financingYou may have the best business idea in the world, but it's impossible to get your business up and running without one key ingredient. Have you guessed what it is? That's right, money.

They say that money makes the world go 'round, and maybe it does. Regardless, having enough of it will certainly impact the success of your business.


One of the first things you need to do when starting your business is to determine where your funding is going to come from. You are going to need enough to provide for three types of capital: start-up capital, working capital, and growth capital.
- Start-up capital. This is what you need to start or purchase your business. You'll need enough capital to cover equipment, furniture, inventory, and to pay for things like permits and licenses.
- Working capital. You'll need enough to pay your bills and also provide an income for yourself before your new business generates one for you. Make sure you have a decent amount, enough to carry you until your business realizes a positive cash flow.
- Growth capital. This is the money you will need if you decide to expand your business. Why is this needed up front? Because many entrepreneurs try to expand their businesses using their working capital, and fail.

Securing Funds

Once you know how much money you need to start your business, you'll have to figure out where it will come from. Funds can come from many sources, including personal savings, credit cards, family and friends, banks, the government, and through private investors.

Personal Funding. If you are one of the lucky ones, you have enough cash socked away to meet your start-up, working, and growth capital needs. Financing your own business by using your own savings or investments is one of the best ways to fund your business. Why? First of all, you are in complete control of how funds are used. You can use them whenever you want, for whatever you want. There are no forms to fill out, and no worrying about whether or not you qualify for the amount you need. Best of all, you have no debt! You can usually access money through your savings accounts, investment certificates, retirement funds, mutual funds and stocks, or insurance policies. It may also be possible to liquidate or borrow against personal assets such as your boat, recreational vehicle, or home.

Borrowing From Family or Friends. Asking family members or friends for a loan is a common way of getting capital for your business. However, before you borrow, know that many businesses fail. If your business fails, will you be able to pay your source back? Keep in mind that money can irrevocably ruin relationships. If you do decide to borrow from friends and family, keep the transaction as formal as possible, complete with a promissory note that includes the details of the transaction.

Credit Cards. We've all heard the stories of hugely successful businesses that have been started with credit cards. However, the disadvantage is obvious: credit cards often have interest rates of as much as 20 percent. If all other sources of funding have been exhausted and you decide to go with credit cards, make sure you pay off the balance as soon as you are able to. And shop for credit cards with low interest rates and no annual fees.

Bank Loans. Business start-up loans are often available from banks to entrepreneurs with good credit. In some cases the loan will need to be secured, which means that it is guaranteed with some other type of investment. Secured loans usually have lower interest rates. You may also opt for a secured or unsecured line of credit, which also traditionally has a lower interest rate than unsecured credit lines. If you go to a bank or credit union looking for funding for your business, make sure you bring an excellent business and marketing plan with you. Banks want to know they are investing in a business that has the potential to succeed.

Government Business Loans. Government programs that give loans to new or existing businesses are administered through the SBA. There are different types of loans available depending upon the size, scope, and sector that your business is in. For more details, contact your local SBA. It is important to understand that the programs in no way guarantee securing financial assistance. Pursuing government funding is very similar to pursuing bank funding. You'll want a good business and marketing plan in hand, and whether or not you receive funds will be based upon the potential of the business.

Private Investors. Private investors are also a way to fund your business, although be prepared for the investor to loan money only if certain requirements are met. The investor might want an equity position within the business, for example, or may even want the ability to make decisions. If you go the private investor route, do your homework and choose someone who has plenty of experience providing capital in return for being a part of a successful business.--------------------------------------------------------------------------------------------------------If you are a business owner get listed at Best Repair Site, part of Localwin Network.
About Us | Privacy | Terms | Copyright © 2005-2015 Localwin.com. All rights reserved.