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How Can I Obtain Business Financing? Part 4 of 4

In the first articles in this series on How To Obtain Business Financing, we discussed how to prepare for finding financing for your company, types of business financing available for businesses, the paperwork you’ll need for funding and creating financial forecasts. This last article in the series discusses the differences between financing a startup and an existing business.

Financing a Startup versus an Existing Business

An important distinction in your search for funding is whether your business is a start-up or an existing business. Many funding options for start-ups also apply to existing businesses, but the reverse is not always true. Because existing businesses often have revenue and established credit lines, options for funding existing businesses are a little different than for start-ups. If you’ve been in business for several years and can show a history of sales and accounts receivables, you have more choices available for funding.

If you’re considering launching a new business, funding your venture can be very challenging. Banks don’t generally loan money to new businesses. Without a history of sales, conventional banks will often require that you contribute a sizable portion of the funding required in the form of owner equity. You must also have good credit and will likely be required to put up collateral for the loan.

There are many ways to finance a business. Here’s the top list of ways to finance a startup:

  • Your personal savings
  • Bootstrap the business
  • Keep your day job and start the business on the side
  • Live on a spouse’s income
  • ‘Friends and Family’ funding
  • Personal lines of credit
  • Home Equity loans
  • Bartering
  • Government grants and funding sources
  • Private investors and angel funding

Here’s the top list of ways to finance an existing business:

  • Increase sales to existing customers
  • Add new products or services
  • Modify your price structure for existing products
  • Identify new markets
  • Get competitive bids on materials and services
  • Expand hours of operation
  • Ask for trade credit from your suppliers
  • Consider factoring
  • Equity financing
  • Employee Stock Ownership plans (ESOP’s)

Consider all of your options and pursue the one(s) that are best for you, your family and the health of the business. Be sure to write a business plan and create financial forecasts, then discuss your funding needs with your accountant and business attorney. They’ll be able to offer guidance and additional ideas based on your situation.

Finding financing for your business is challenging and time-consuming, but with the right preparation and a fundable business idea you’ll be able to put together a package of funding that works for your business and for you.

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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Discussion (2) Comment

  1. loanuniverseVisitor

    I like the article because it makes a clear differentiation between the financing of a startup, and an existing business. Getting traditional financing for a startup is next to impossible, but a lot of avenues are open once the new business shows that it is profitable. A word of advice about factoring, it is usually one of the most expensive ways to finance an existing business.

  2. ChuckVisitor

    Nice post. I would also try the SBA (Small Business Admin.) for a loan or just for help. Many states also “Grant” money to “Green” companies. Grants are also out there for “new hire’s if your an existing business.


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