As any entrepreneur will tell you, growing a business takes
blood, sweat and tears -- but even those aren't enough if
you don't have capital. Fortunately, there are a lot of
financing options available to business owners. It can be
overwhelming to research and navigate those options, so
let this serve as a kind of introduction to help get you
started making -- or at least borrowing -- the big bucks.
The Loan Proposal
First impressions are important to the success of your
business, as well as the success of your loan application.
Oftentimes, a lending institution will only allow you to
submit one loan proposal and application, so make it count.
Carefully prepare your proposal letter, being sure to
include all relevant information as clearly as possible.
Your proposal should include: an introduction of yourself
and your business, how much financing you need, how the
financing will be used by your business, your requested
terms for repayment, and how you will repay the loan.
Include any industry-specific details that will enhance
your reader's understanding of your business, but keep your
proposal as concise as possible. And, whatever you do,
proofread carefully. Don't give your reader a reason to
doubt your professionalism.
SBA Loans and Programs
The Small Business Association can operate as a guarantor
of loans, and offers a number of programs to help business
owners obtain the financing they need. One valuable service
is their loan prequalification program. The SBA will review
your loan application and, if necessary, help you
strengthen it before you submit it to your lending
institution. They may also be able to sanction it, giving
it their seal of approval, which can only help you through
the application process.
The SBA's primary business loan program is the Basic 7(a)
Loan Guaranty. It helps small businesses that might not be
able to secure financing through normal lending channels.
Financing can be used for a variety of general purposes,
and loan maturity is generally up to 10 years for working
capital and up to 25 years for fixed assets. Other loans
include the Certified Development Company (CDC), a 504 Loan
Program that provides long-term, fixed-rate financing to
businesses, and the Microloan 7(m) Program, which offers
short-term loans of up to $35,000 to small businesses and
non-profit child care organizations.
Equity Financing
Equity financing is money obtained by a business in
exchange for a share of ownership in the company. Young
businesses might receive equity financing from either
angel investors or venture capitalists. Both will typically
provide unsecured funds to help grow a business, and accept
the higher risks involved in hopes that the business will
provide them a higher rate of return (ROI) than other, more
traditional investments. Because angel investors and
venture capitalists are typically successful business
owners themselves, they often require an active role in the
business, or at least a seat on its board of directors. It's
important to remember that savvy investors will have an
exit strategy from day one. If your business doesn't
perform to their expectations, they will cut their losses.
Good luck!
Hopefully, this brief introduction to major funding sources
will prove helpful for you. Again, there are a number of
detailed resources available, both online and at various
lending institutions. Thorough research and preparation
will undoubtedly help your capital campaign, and your
business, succeed.
|
