How to Finance a Small Business

Many sources of funding exist, but which one you choose will depend on a variety of factors.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Accounting Services
• Business Loans
• Credit Reports
• Small Business Credit Cards

1. Decide how much money you need to start or expand your business.
2. Write a business loan proposal that outlines your company's financial history and projected profits.
3. Get a credit report.
4. Apply for a bank loan if yours is an existing business. Banks typically do not lend to start-ups.
5. Apply for a Small Business Administration secured loan. Start-ups may need significant assets and capital to qualify for one.
6. Opt for one of the Small Business Administration's loan programs designed to provide start-up capital or, if you fall just short of qualifying for a bank loan, to purchase commercial real estate.
7. Consider a personal loan if you require only a small amount of money or have poor credit.
8. Apply for a line of credit at your bank if yours is an existing business in need of a flexible source of capital.

Tips & Warnings

• Contact the Small Business Association to find out what loan options are open to you.
• Develop a history with your bank before applying for a loan.
• Time your loan proposal to coincide with an upturn in the industry. Banks are hesitant to loan money to businesses that are part of an industry in a downturn.
• Include interest in a personal loan, or the Internal Revenue Service may treat it as a gift.
• Pin down banks on exact fees and interest rates.
• Every request for a loan or line of credit will show up on your credit report, so plan carefully.
• Avoid personal loans if you are uncertain you will be able to repay them.