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:
FINANCING A SMALL BUSINESS
Small Business Information
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