HOW DO I FINANCE MY BUSINESS?
You have a great idea for your business and you have found the best place to locate it. You know who will buy your product or service and you know who your competitors are. But starting and running your business is going to take cash, possibly a lot of cash.
How much money do you need?
If you do not know exactly how much money you need, then no-one is going to lend anything to you. And nor should they, because it means that you have not thought through your business plan properly. Without enough working capital, your business' vital functions will fail. It won't be able to meet its daily requirements for living, such as purchasing supplies, paying rent, and paying salaries. The Business Plan includes a section about Financial Matters. Within this section, you will tabulate financial data and projections related to your business. Based on the estimated projections contained within your Business Plan, you will be able to determine how much money you will need, both to start your business, and to keep it humming.
Sources for your business
Personal sources include: savings accounts, insurance policies, stock and other investments, second mortgages, and donations from friends and relatives. Note: You will probably need to provide at least 20% of what you need from personal funds if the needed funds are coming from a bank.
Remaining sources for business
1) Debt. Debt is a loan made to you or your business. Sources of debt lending include banks, credit unions, federal lending programs and state financing programs.
2). Equity. Equity is ownership rights and privileges in your business that you give away in return for capital. Businesses seeking this type of financing must become a Partnership, Corporation or Limited Liability Company.
3) Alternative Funding. Alternative means of funding include: suppliers who provide concessions, such as extended payment periods and discounts; and grants.
*note: Grants, for the most part are only available for non-profit organizations.