Financing Your Small Business

So, you are finally 100% committed to starting your own business. The research is done, the business plan proposal is complete, but where will you get the money to fund the expenses of your new business? Midlantic Business Alliance states, "This is an important decision which should be properly made before you make any other commitments such as leases, advertising contracts, or the purchase of other equipment. More businesses fail because they are under capitalized than for any other reason. Too often the business owner just did not understand the various costs and other expenses that the start-up of the business generates."

There are basically only two types of finance available, equity and debt. Equity is capital invested in the business, which is usually not repayable until the business fails and closes down entirely. Then there is debt, which is a cash advance to a business and is usually repayable at a specific date. Such as a loan from a bank or friend.

Sources of Financing Assistance:

• Personal Assistance
• Family and Friends
• Venture Capital
• Lending Institutions
• Public Sector Financing
• Bank and Credit Unions

No matter how you look at it, there are really only two resources to choose from your own or someone else’s money.

According to Small Business Administration there are a few questions you must have answers to. Below are just a few to think about before asking for financial assistance.

• How much money is needed?
• Why do you need a loan to accomplish your goals? (How do I know there is a need for what I plan to offer the public?)
• When will you repay the loan?
• What will you use as collateral?
• What happens if the business fails?

The following resources can help answer some of these questions.

State and Local Resources:

• Small Business Administration: Cleveland Location
• Quicken: Start Me Up: Financing Your Small Business
• Northeast Ohio Finance & Incentives

Local Bank Resources:

• Charter Bank
• Dollar Bank
• First Merit Bank
• Fifth Third Bank
• Huntington Bank
• Key Bank
• National City Bank

National Resources:

• Small Business Administration: Finding the Money You Need
• The SCORE Association : How to Borrow Money From People You Know
• Express Business Funding: Free SBA Loan Kit

Support for MoneyWatch is made possible by Charter One Foundation. Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration