SCORE Small Business Blog

How Can I Obtain Business Financing? Part 2 of 4

In the first article in this series on How To Obtain Business Financing, we discussed how you can prepare for finding financing for your company. This second article in the series focuses on the types of funding available and the paperwork you’ll need for loan applications.

Types of Business Financing

People finance their businesses any number of ways. The most popular? Using their own money. But the money doesn’t always come from one place. Most business funding consists of a blend of different types of financing. Here’s a breakdown of the most popular funding sources:

  • Personal savings and bootstrapping
  • Personal and business credit cards
  • Personal and bank loans
  • Supplier credit
  • Government lending agencies and grants
  • Private investors and angel funds

One of the most common ways to finance a business is with a loan. Finding a loan for a new business is particularly challenging. Bankers aren’t inclined to give loans to a new business that lacks a track record of sales or credit history. Existing businesses have an easier time finding financing than new businesses, but both need solid business plans with accurate financial forecasts that correctly project cash flow. A good way to quickly develop financial forecasts and automatically generate a business plan is to use the free online business plan writing software at Enloop or use the free templates and tools provided by SCORE.

Paperwork You’ll Need for Funding

When people think of business financing, they’re generally thinking of loans. Personal loans, and many business loans, are primarily based on an individual’s credit score. Most business loans require that the loan be personally secured by the business owner’s assets.

You’ll want to put the following documents together before approaching any lender or investor:

  • Three credit references, including names and contact numbers. It’s a good idea to contact each reference to let them know you’re naming them as a reference.
  • List of personal assets that you’re prepared to use for collateral
  • Business formation documents, such as Business Licenses, Articles of Incorporation, and DBA (Doing Business As) forms
  • Financial statements for each owner
  • Federal tax returns for each owner (three years)
  • Federal tax returns for the business (if the business is a going concern)
  • Financial forecasts for the business and a business plan

The next article in this series discusses preparing financial forecasts and the importance of understanding cash flow forecasts.

Cynthia McCahonFounder and CEO,
After years of providing business planning and development services for private clients, Cynthia became acutely aware that many entrepreneurs struggled to develop accurate business plans and saw the need for a free tool like Enloop. | Facebook | @cmccahon | More from Cynthia

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