Financial Resources for Small Businesses
Starting a business is a scary thing. It takes planning… and then more planning, and of course financial resources to get started. Today we’ll discuss the different types of financial resources available to you and how you can secure them.
Before you look to get any financial aid or any other type of assistance for launching your business, you must have a solid business plan! No credible lender or partner will go into business with you or lend you any money before you have a credible, well thought-out business plan!
Don’t have a business plan? Stop reading and go work on one, now!
You’ll be happy to know, most of QC’s courses come with an optional business unit where your tutor will help you develop and streamline your business plan!
Small Business Loans and Micro Loans
This is the most common resource available and used by many small businesses to get started. Small business loans are generally granted by banks or federal governments in certain countries. This is a typical loan that is awarded to yourself as a representative of your business.
These loans generally come with better interest rates than personal loans, but most do require you to provide a personal guarantee to back up the loan. Which means your personal property might be at risk if your business should fail.
As we mentioned above, before you are granted a small business loan, you will be asked to share your concrete business plan and discuss it with a representative of the institution who would be granting the loan. Be ready to answer questions about your business strategy, competitor research, and any other element that is in your business plan!
This is a type of private loan where an individual or firm will provide financing for your business in exchange for a stakehold in the company.
Generally venture capitals will want to be involved in your business decisions in order to ensure they secure their investment. If your business has a limited operating history and you do not have much collateral, you might need to give up a large portion of your company’s share.
Again, you’ll need a very solid business plan in order to get funding from a venture capital!
Personal Loans and Business Partnerships
An option that is always available to business owners is to obtain personal loans from friends and/or family members. If you choose to go down this road, be sure you outline specific terms including interest rates and a repayment schedule to the lender. If you offer them a stake in the company in exchange for the loan, you should also discuss how much involvement they will have in the company’s business decisions!
Personal loans can take a toll on relationships. But the more informed both parties are on the specific terms and expectations of the loan, the better off you’ll be!
Personal / Business Credit
If you cannot obtain any other forms of loans and you have a good credit history, you should be able to secure an account with major credit card companies. If you have an established business with a solid business plan, you can likely get a small business line of credit that will have a significantly lower interest rate than a personal credit card or line of credit.
You can apply for most major credit cards via banks or on the credit card company’s website.
Whatever channel you decide to use in order to finance your business, the key is to plan ahead and not give up! The more time you spend on your business plan and the more prepared you are to search for financing, the easier it will be to move forward.