As 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:
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.
Less familiar forms of financing (especially for relatively new businesses) include seed funding, crowd funding, angel investing and venture capital.
Aside from direct loans or grants, other options include:
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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