Finance Your Business

You need to finance your business-- you have a business plan, a product or a service, and are ready to make it happen! To do this, however, you require $$. Where will you get it?

There are several different sources for financing small businesses. Options include self funding, finding investors or partners and getting loans. Here, we describe the different types of financing to give you some ideas.

Finance Your Business: Self-funding

Savings—when speaking of personal finance, savings is money you have put aside for future use (such as retirement, emergency funds or paying for college.

Credit Cards—plastic cards used to make purchases as a type of loan. If, on the date the payment for the purchase is due, the amount is not paid, the lender charges interest on the unpaid balance.

Home Equity Loans–loans obtained through using the amount of equity (value of your property over and above any mortgage or other liabilities relating to it) in your home.

Borrowing Against Life Insurance Policies—if you have a life insurance policy with a cash value, you may be able to borrow funds against a percentage of that value.

Borrowing against 401(k)—borrowing money from your retirement 401k account.

Using IRA funds–taking money from your retirement IRA account.

Borrowing from friends/family

Click to learn about the pros and cons of self-funding

Finance Your Business: Investors and Partners

Venture Capital—Groups of investors, including wealthy investors, investment banks and other financial institutions. Most likely only given to established companies with a proven track record, or businesses with a strong likelihood of foreseeable growth.

Angel Investors–a single individual, or groups of such individuals, willing to invest their own money in a startup business. Generally provide funding at levels smaller than venture capital groups do.

Strategic Partner—a partnership or a joint venture established for the purpose of creating mutually beneficial relationships, to utilize the strengths of the partnership to develop new business products, ideas, strategies and income. May be short or long term relationships.

Partner—similar to above, but with the variation that in the traditional sense, a partner is a colleague that joins the business from the outset and is in it for equal shares.

Click to learn about the pros and cons of investors and partners

Finance Your Business: Loans

Line-of-credit-A short term loan that extends the cash available in you business’s checking account to the upper limit of your loan contract.

Installment Loan-Paid back with equal monthly payments covering both principal and interest.

Balloon Loans-Interest paid during the life of the loan, with a large, “balloon” payment at the end of the loan.

Finance Your Business--Click Here to Learn More about Ways to Finance Business

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