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Show me the money!
Employee Emeritus Employee Emeritus ‎11-10-2015 12:42 PM

Acquiring Funds.jpgAs the saying goes, “Money makes the world go ‘round,” and for an entrepreneur or small business owner, it can be a central part of his or her business world. Money is a requirement for business expansion. There are multiple ways to acquire funding. The more you learn about these options, the easier it will be to make a sound decision. A good place to start is with other business owners you know. Talk with those that have recently gone through an expansion and learn from their experiences.


Let’s take a look at a variety of approaches to acquire funds for business expansion...


Your local bank

The most familiar forms of financing small businesses include borrowing money from your bank, such as:


  • A secured loan establishing a line of credit against tangible assets (like real estate or equipment owned), allowing you to draw against your credit as needed
  • An unsecured business line of credit with a personal guarantee
  • Utilizing open credit on business or personal credit cards
  • Factoring receivables, which involves selling your receivables to a third party to improve cash flow (this can be completed both through banks and other institutions who deal in factoring)

All of these approaches may be good options in certain circumstances. Bank loans sometimes are challenging to acquire but easier to secure if the small business has significant collateral or a long financial track record. Using personal credit cards is an option which should only be used if the business will generate enough cash flow to quickly pay the credit cards down; otherwise, there is a potential for high interest payments to offset the gain.


SBA Loans are another option for some small businesses. Funding is available through SBA Express Loans for small business owners, and SBA Patriot Express is available for veterans, active duty (participating in TAP), reservists, and current spouses or widowed spouses. More information on these loans is available at www.sba.gov.


Other SBA grants and loans also are available for women/minority owned businesses, businesses involved in energy efficiency, disaster-struck areas and specific groups like farmers. Some states/cities also have loan programs to support designated urban areas.


Family or friends 


Close friends or family members may be a potential source, but beware the pitfalls that financial ties may have on these valued relationships, especially if your expansion plans don’t yield the agreed upon return. Sometimes, family or friend loans are done with a handshake agreement; however, a more formal, written agreement may benefit some individuals and help protect valued relationships.


Additional options


Less familiar forms of financing (especially for relatively new businesses) include seed funding, crowd funding, angel investing and venture capital.


  • Seed funding is a form of securities funding where an investor purchases part of your business (normally early in the business’s creation) and maintains that partial ownership.

  • Crowdfunding is relatively new and includes companies like Kickstarter. There are over 450 diverse, crowdfunding platforms. These are all located on the Internet and allow individuals to invest in companies they're interested in.

  • Angel investing is when an affluent individual, or a group of investors, provides capital to a business for convertible debt or ownership equity.

  • Venture capital is primarily generated through venture capital firms for early stage, high-risk/high-return (potential) start-up companies. Normally, companies that acquire venture capital possess a novel technology or unique business model.

Aside from direct loans or grants, other options include:


  • Alliances with other businesses: This involves forming partnerships with complementary businesses. For example, a lawn mowing service might partner with a nursery so that each promotes the other to their own customers. This can help build revenue streams for each party.

  • Licensing/franchising your business: This involves allowing other parties to open your business (or use your name/products) in other locations when they pay a licensing or franchising fee to you (common with restaurants, etc.). There are obligations for each party to support the franchise, and both parties must fully understand their obligations.

With so many options, it is up to you to decide which path makes sense for your business. All forms of loans and borrowing come with some degree of risk. It is always prudent to ensure that your cash flow can support the loan requirements. It also is wise to consult with a trusted, outside financial/business expert when acquiring loans.


Enjoy the process of exploring funding your business. There are many options for your business today and for your business tomorrow. In addition to www.sba.gov, you may enjoy exploring www.encore.org, and www.nase.org.

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Contact the editor: tumara.r.jordan@verizon.com