Financing Your Business

Financing Options
Many entrepreneurs need financial resources to start or grow their business. Often times, they must combine what they have with other sources of capital. In the world of financing a business, there are several options:
  • Debt financing
  • Equity financing
  • Grants
The type of capital the entrepreneur seeks is dependent upon the dollar amount needed and how the capital resources will be used.
  1. Debt Financing
  2. Equity Financing
  3. Grants
Debt Financing
Debt financing is the most often used and requires going through lending institutions, friends, family or investors. Many entrepreneurs first think of the Small Business Administration (SBA), which has many loan programs available. It's important to note that the SBA does not finance businesses, the entrepreneur must go through a local lending institution first. It's also important to note the SBA does not offer grants to individual business owners to start or grow a business.

Here's a typical lender's checklist for small business financing:
  • Business financial statements - to support your application and demonstrate your ability to repay the loan, prepare and include the following financial statements:
    • Profit and Loss (P&L) Statement - this must be current within 90 days of your application. Also include the last 3 years if available.
    • Projected financial statements - for start-up businesses, include a detailed, one-year projection of income and expenses.
    • Company debt schedule
  • Business lease - include a copy of the business lease or note from the landlord giving the proposed lease terms
  • Business Overview and history - provide a brief history of the business and its challenges. For start-up businesses, include a Business Plan.
  • Completed loan application from the financial institution
  • Copy of proposed purchase contracts, if applicable
  • Income tax returns - include signed personal and business federal income tax returns of your business' principals for previous three years.
  • Ownership and affiliations - include a list of names and addresses of any subsidiaries and affiliates
  • Personal Financial Statement (PDF)
  • Resumes - include personal resumes for each principal
Anyone considering debt financing should adequately prepare in advance and expect to take at least several months to go through the process. Existing businesses should ensure they are keeping their books and financials up to date.