Preferred Consumer | Small Business | Financing A Small Business


Financing A Small Business

Get your personal finances in order:

  • Pay off consumer debt
  • Prepare financially to leave current job
  • Shrink spending
  • Manage stressors at home (communicate with family members)
  • Determine that you have enough insurance (long term disability, term life, health)
  • Have a fair amount of savings (education, retirement, cash reserves)
  • Consider part time work as you start your business
  • Plan financially for time off (vacations and rest)

Determine start up costs:

  • One time costs (equipment, permits, legal fees)
  • Working capital (covers everyday costs)
  • Reserve (covers variances from budget)

Criteria for SBA loans include the following:

  • Owner investment of 30% or more and ability to guarantee the balance of the loan
  • Owner is active in management of business
  • All key players must have clean credit history
  • Business must project adequate cash flow to pay of loans (debt/net worth ratio must fall within SBA guidelines)

Sources of financing:

  • Bootstrapping -- Most small businesses are initially financed this way. Bootstrapping includes using your own financial resources and equity investments and/or loans from family, friends, and relatives.
  • Outsourcing
  • Banks -- Asset Based Financing, Line of Credit, Letter of Credit
  • Non Banks -- SBA Loans (Small Business Administration)

Sources of other financing: