Small Business Financing For Your Next Venture
Congratulations! You have decided to start your own business. Now that you have charted your course, it’s time to think about financing your endeavor. When it comes to small business financing, there are a variety of options to choose from.
Family and Friends
In many cases, your best investors may be closest to you. Your friends and family may be willing to loan you a sum of money to help you get started. You may not need to put your house up as collateral and they may be happy to sell their interest back to you once your business is up and running.
Customers
If you have customers lined up to purchase your new product or service, they might be willing to advance you some of the cash that you need. If you offer them a discount, they may be eager to help you get the initial version of your product out the door.
Small Business Loans
Many banks provide federally-backed SBA 7(a) loans. Since any losses are guaranteed by the government, lenders are able to offer loan packages for new businesses. Interest rates vary according to the size of the loan, so shop around for the best deals.
Traditional Bank Loans
Banks have the most options for small business financing. You can obtain short and long-term loans for a variety of needs, such as real estate, working capital and equipment. You must demonstrate that you can generate sufficient cash flow to cover the principal and interest payments.
Local Organizations
Local and state economic development organizations offer loans with attractive rates and terms. They are commonly partnered with business loans, so you can borrow more money at a lower overall cost. Contact your local chamber of commerce for more information on these programs.
Small Business Innovation Research Grants
If you are transforming your intellectual property into a tangible product, an SBIR grant might be one way to pay the bills. Though the application process is a bit involved, you can get the government to help you fund your new business.
Tax Planning
The IRS is not a bank, but proper tax planning can generate extra cash for your business. Work with your accountant to identify the deductions you should be taking. When your business starts to generate a profit, see if you can use some of those funds to expand your business.
Small business financing encompasses a variety of options. Before you move forward, take some time to see which choices make sense for your new business. Your financial strategy may impact the success of your new venture.