Selling Your Business

Personal savings: The primary source of capital for most new businesses comes from savings and other forms of personal resources. While credit cards are often used to finance business needs, there may be better options available, even for very small loans.
Friends and relatives: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest free or at a low interest rate, which can be beneficial when getting started.
Banks and credit unions: The most common source of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound.
Venture capital firms: These firms’ help expanding companies grow in exchange for equity or partial ownership.

Borrowing Money

It is often said that small business people have a difficult time borrowing money. This is not necessarily true. Banks make money by lending money. However, the inexperience of many small business owners in financial matters often prompts banks to deny loan requests. Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: High Risk!

To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it and how you will pay it back. You must be able to convince your lender that you are a good credit risk.

Approval of your loan request will depend on a number of variables. Improve your chances of obtaining a loan by preparing a written loan proposal. Your loan proposal should contain elements such as a comprehensive business plan, statement indicating purpose of loan, amount of loan, list of collateral, cash flow projection, and, if an established business, a balance sheet and income statement for previous three years.

Most importantly, does the business have sufficient cash flow to make the monthly payments on the loan request? If not, is there a secondary source of funds available to service the debt?

Take time to talk to your banker about your financial needs. Each bank has different requirements and time frames. Keep in mind that looking for financing is like obtaining any other commodity - shop around!

Follow these tips when working with your lender:

The professional relationship that you develop with your lender may be your most important relationship.

One alternative to traditional financing is leasing. Advantages of leasing include: usually a lower down payment, longer maturity, and protects against product obsolescence. There may also be certain tax advantages. Disadvantages include higher finance costs and no ownership after all payments are made.

How much money do you need to borrow to start your business?

The following is an outline to help you determine how much money it may take to start your business.

Use this outline to determine how much money it may take to start your business.
1.	Land / Building	$
2.	Machinery and equipment	$
3.	Furniture and fixtures	$
4.	Inventory and raw materials	$
5.	Miscellaneous start-up expenses	$
6.	Anticipated operating cash required (Accounts receivable, wages, etc.)	$
7.	Total Project Costs (Add lines 1 through 6)		=$
8.	Amount of personal funds you plan to invest	$
9.	Amount invested by other partners (or investors)	$
10.	Total investment (Add lines 8 and 9)		=$
11.	Amount of loan (Subtract line 10 from line 7)		=$

Where to Find the Money You Need

Borrowing Money

Follow these tips when working with your lender:

How much money do you need to borrow to start your business?