Financing For Your Small Business
Financing your small business can be challenging, but there are some different options out there. Before seeking financing of any kind make sure you have a solid business plan in place that contains accurate financial data about your business and specifics about how much money you will need, when you will need it, what you will use it for, and what return on investment you expect and when you expect it. Some of the most common sources of funding are loans, grants, and venture capital.
Financing Your Business With A Loan
You can take out loans for many different purposes such as operating expenses, cash flow loans for creating the cash you need, or loans for space and equipment. The most important factor in securing a loan is your credit score. If you have an excellent credit score and a solid financial outlook you may be able to get a loan from a private bank. Be sure to take your business plan with you and all of the financial documentation required by the bank.
Financing Your Business with Grants
Chances are you will not be able to secure a federal government grant because government grants are funded by tax dollars and so they have very stringent compliance and reporting measures and are reserved for non-commercial organizations such as non-profits and educational institutions or state and local governments. There are some small business grants available through state and local programs, non-profit groups, and some other groups. These usually require you to combine the grant with other forms of financing or match the grant amount with private funds. These loans are usually only available for very specific business purposes such as making something more energy efficient or expanding child care. If you do not fit into these categories you can contact the state and federal government about low-interest loans and venture capital from commercial lenders.
Financing Your Business With Venture Capital
If you find that you cannot secure money through loans and grants you may want to consider venture capital as a source of funding. Venture capital is money that is invested in your business by private companies usually in exchange for a share in the company and an active role in your company. You need to consider how much of your company you are willing to share and how much control you are willing to relinquish before seeking venture capital funding. Venture capital is usually invested as cash and the investors will expect a fair return on their investment. Two places to seek out venture capital funds are the New Markets Venture Capital Companies and the Small Business Investment Company (SBIC), which are regulated by the SBA but are composed of profit-seeking investment companies.
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