Things You'll Need:
- Financial statements for your business for previous five years (if available) Updated business plan with financial projections for next five years
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Step 1
Determine how much money you will need for your business growth. Update your business plan projections with current information based on past sales and new sales initiatives. Include projected loan payments in your cash flow to ensure that your expected growth in revenues more than covers the increase in expenses. Be sure to include any new equipment or materials you will need to achieve the planned growth in sales.
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Step 2
Make a list of potential sources of funding including your bank, the Small Business Administration, other government agencies and venture capitalists. Your list may look very different from the one you compiled when you sought financing the first time. Many sources of financing will consider an existing business but not a startup, so as long as your business is doing well, you may have more financing options than you did initially.
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Step 3
Meet with your potential funding sources, beginning with the one with the most favorable rates and terms. This will often be your own bank. Your bank has an existing relationship with you and is in a better position to assess your creditworthiness and that of your business more accurately than other sources. However, even if your bank offers your financing, be sure to meet with other potential investors and financiers to discuss your options. At the very least, you will be building relationships with these people for the future. There might also be offers of financing that are more favorable than that of your bank.
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Step 4
Minimize the amount of personal guarantees or security you have to provide to get the financing. Your lender's goal is to have as little risk as possible on the loan. To do this, they will often ask for personal guarantees and security such as a lien on your family home so that if your business goes bankrupt, they can go after your personal assets. This presents significant risk to you and your family so try to negotiate it down with the lender. A preferable way to go is to allow the bank to place a general security agreement over your business assets.
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Step 5
Choose the financing offer with the most flexibility and the best interest rate. Read the offer completely and ensure that there are no hidden fees or clauses that will increase your rate or pull the financing from underneath you. Choose a loan that can be paid off early so that you can manage your cash flows and expenses.
