Loans: The Meat and Potatoes
There are several types of loans and several types of financial institutions you can look to for financing. The one thing that you will find is a reoccurring topic, “How are you going to pay back the loan?”
So, how are you going to pay back the loan? That’s a question you are going to need to have a good answer to.
Consider your Financing Options
A well financed business will help you sleep at night. A relatively short time ago a business could get started up with a shoe string budget (and some still do), but nowadays you need financing if you are going to have a fighting chance. It’s that simple. I don’t care what anyone says about the companies that started in Garages or basements- they are an exception and it does not happen normally. Why risk your business on being the ‘exception?’ Get properly financed first.
Computers have transformed the till from a cash register to a point of sale and inventory control center that allows competitors to instantly track sales and determine inventory orders. Also, desktops and laptops have become the customer service person that handles instant, global purchases, sales, orders and communications. It’s not free.
Whether you are starting a business or already operational, you should get at least enough financing to cover your operational and setup costs. The bare minimum should be a reserve that can last at least two months. Regular revenue streams are tricky to build at first and having an extra month or two in the bank to help out can mean all the difference.
Where do you find the capital you need? We’ll hit that head on now.
Sources of Capital
So, where do you find your capital sources? First make sure you exhaust all financing options, such as:
- Personal Savings Accounts
- Family
- Friends
- Bringing in a Partner
- Banks & Credit Unions
- Non-Traditional Lenders
Be sure not to forget about other avenues, like:
- Credit from Vendors and Suppliers
- Equipment Leasing
- Venture Capital
- Angel Investments / Seed Money
- Business Plan Competitions
- Government Grants
Note: A possible source of grants for small businesses is the White House Faith-Based and Community Initiative funding that comes from federal agencies like HUD down through to churches and non-profits, to which you apply for a grant for your business.
Do not be misled by the name, the program is for any for-profit or non-profit business that qualifies. You can view the program by going here.
Be Accountable and Take Stock
Take stock of your personal assets such as savings, investments, availability of credit or equity in your home. See what you can afford to risk and do it. You can even raise money by selling valuables you may own. It is much more advantageous to come in with no debt rather than borrow the money. You would be surprised how much you can come up with on your own.
While you may not have enough money in your pocket or personal account to get your business going and cover costs, be prepared to use a lot of your own money if you are going to ask for a loan. Many financing sources and loans will expect you to put your money and property up and at risk along with theirs.
