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