Tisha Kulak is a writer for Creditorweb.com, where she writes about credit card offers, business credit cards and responsible credit card use.
There are more entrepreneurs moving forward and following their dreams of opening a business and operating a successful business of their own. While many have found success in starting up, most will face the all-important decision of how to continue to finance their businesses, especially if they are still in the early stages and require more capital to continue on. Here are some things to consider when searching for money beyond a personal savings account.
The Business Plan
This is the first consideration you need to make before even approaching anyone for money. You need to have a solid business plan that you understand and feel confident is complete. While you may have begun your operation without one, it is essential that you have a full understanding of what it takes to keep making your business work. People who give you money want to make certain you are not setting yourself up for failure, or at least a lot of struggle.
Factoring the Finances
Depending on the type of business you running, there are many financial factors to consider. You may already have discovered there is a significant period of time between starting out and making a profit and part of your business plan should account for that. You should also know how much of your start up funds will continue to contribute to your daily living expenses until you are able to procure a steady income. Monthly bills such as utilities, mortgage, car payments, and other fixed cost need to be combined with the variable expenses, including food and clothing and totaled for a period of six months. This also should be presented in the business plan – how you spend your money.
Adding to your living expenses, you will need to factor in all of the costs involved in maintaining and growing your business before you can determine the amount of money you need to borrow. Home-based businesses and services businesses generally have considerably less expenses than other businesses such as a restaurant or retail store.
Finding the Money
Once you have determined the total amount of money you need to keep your business going, you need to choose the best avenue to get that money. Entrepreneurs with excellent credit should begin with a trip to their bank. Schedule a meeting to meet with a loan officer at your regular bank. Bring along a copy of your business plan and make sure you know the details in your plan inside and out. Be professional and ready to stand behind your ideas.
Other options for specific start up business needs include:
*Commercial Financing* – These loans are provided to assist with the financial needs of a new business, including working capital, inventory purchases, account receivable, and payroll. Commercial finance loans usually require assets as collateral.
*Real Estate Financing* – These loans are provided to assist with the new construction or the purchase of a building for business purposes.
*Equipment Leasing* – This type of financing is to assist with the purchase of equipment needed for the business.
*Small Business Association Loans* – The SBA does not provide loans, instead they help guarantee a loan, using funds provided by the US government to provide working capital for small businesses. There are several different programs available and you are still required to be creditworthy in getting a loan from a bank or other financing source.
*Credit Cards* – The reality of small business start ups is that many of them are actually started on credit and to some extent, grown on credit. Entrepreneurs, who may not have credit good enough to get a loan but still have personal credit cards, often opt to finance their business ideas on credit. Unless you know that you can easily make the monthly payments and have a solid plan to have the balances paid off in a certain period of time, using credit cards to finance your entire business is not recommended and could lead to major financial roadblocks down the road, especially if you further damage your credit.
Outside Investors
* Family & Friends – If you are fortunate enough to have people
you are close to you who want to invest in your business, make
sure any dealing is done in writing and even better, under the
direction of an attorney.
* Professional Investors – There are several businesses and
individuals who are in business to invest in your business. Taking
this approach requires a lot of time, research and effort. You
need to have a dead-solid business plan and be completely
motivated to see this option through until the end. Investors are
very precise about where they put their money and you need to be
on your game way before you approach one with your ideas.
Growing a business is definitely not a walk in the park. You must continue to strive towards the goals you have set for your business and stick with it , giving it your all. It will be one of the most fulfilling adventures of your life. Don’t be afraid to seek advice from others who have also started out at the bottom and have found success of their own accord. The resources and the information you get from a person who has been through the process can be invaluable.
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