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Small Business Financing Isn’t Just About Asking Your Local Bank, You Know

To hundreds of thousands of people in this country in search of their own piece of the American dream, finding a spot for themselves as owners of a small business often seems the most promising way forward. The notion of making it big as an online business is increasingly popular today. But the traditional business way of establishing oneself in a small business – starting a retail shop, a franchise or becoming a service provider of some kind – are alive and well too. Small businesses present entrepreneurs with an easy point of entry into the business world, with only a modest level of risk. Startup businesses like this need less capital, less strategic planning and are much more manageable. As modest as small business financing needs are, for people of modest means, they can still be somewhat challenging.

Your first stop looking for small business financing should be either your local branch of the Small Business Administration or its website. The SBA is a government organization that helps millions of businesses around the country find business financing or find a way to locate the kind of resources they need. At the very least, anyone seriously considering starting a business should check out the SBA website for the wealth of information they have on how small business financing works. You’ll find information on special-purpose loans, grants, SBA loans, 7(a) loan programs and all kinds of other resources. Organizations such as the Business Development Center in your area and the SCORE office can help you by being great source of information too. They can also help you locate investors and venture capitalists.

Businessmen starting small ventures who try to find financing with venture capitalists and other independent investors usually have a great start. They avoid the high interest loans that traditional means of finding small business financing usually involve. Finding venture capitalists and inspiring their interest in your venture is no small matter. You’ll usually need to create a business plan that is convincing enough, and you will need to find mentors and other kinds to helpers who will assist you in finding the right kinds of resources.

Where does one find Angel investors though? Most of these investors operate in networks; and you can tap into those networks on websites like vCapital and Garage. But there are more traditional ways that you could pick, too. A loan you obtain through a local financial institution, guaranteed by the SBA government organization usually comes with a longer loan period than a regular business loan. You would even have to contribute a smaller down payment. You’ll find SBA 7(a) loans at most banks when you go through their small business resource centers. You could also take advantage of the term loans that banks have too – these help you with your needs for working capital or for funding for machinery or other business establishments needs.

Using Multiple Sources of Small Business Financing

One misconception about starting a small business is that the only way to receive small business financing is through a bank. Though the bank is a viable option, it is not the only option. Looking towards multiple sources of financing can get your small business the financing it needs. Alternative sources of financing can be used instead of, or in addition to a bank loan. Using multiple sources of financing can help a new or veteran business owner maximize his/her business’ working capital.

Listed below are a variety of small business financing sources, that small business owners can utilize when building, expanding and maintaining their businesses.

Small Business Administration

The small business administration was created to help small businesses get on their feet and remain on their feet. Their mission is “…to maintain and strengthen the Nation’s economy by enabling the establishment and viability of small businesses and by assisting in the economic recovery of communities after disasters.” So why not look to the SBA for assistance?

The most common SBA loan program is the basic 7(a) loan program. This program is specifically designed for small business owners who may not be eligible for business loans through normal lending channels. Other loan programs offered by the SBA include the 504 Program, which provides growing businesses with long-term, fixed-rate financing for major fixed assets, such as land and buildings, Micro-Loans that provide very small loan amounts for startup small businesses, with a maximum loan amount of $35,000. Disaster Recovery Loans, which can assist in the recovery of your business if it is involved in a disaster, and Special Purpose Loans, that can be used for any special purposes within your business.

Grants

Just like there are scholarships available for just about anything, if you do enough searching, you could find the small business grant that works for you and get free money to finance your business. Though the federal government does not offer grants to small business owners, there are numerous other grants available for small business owners. You can look to your own state to find free funding your small business. Every state has a state development agency, and many of these agencies offer small business grants, and/or information on where to find them.

Small Business Cash Advances

Though a small business cash advance is not plausible for startup businesses, it can be used after your business has been up and running for a period of time. A business cash advance can offer fast and easy-to-obtain money for your small business’ financial needs. With few requirements, even business owners with average or fairly below average credit scores can qualify to receive a business cash advance.

Financial Intermediaries

A financial intermediary is a person who specializes in finding funds for business owners. Once you’ve done all you can to find money for your business, try hiring a financial intermediary to find the funds that you may have overlooked.

You can decide to use the expertise of a financial intermediary in order to give yourself the time to work on other aspects of your business, or you can use them in combination with your own expertise; as the saying goes, two heads are better than one.

Financial intermediaries can also be used to help in the start up of your business, offering help with the writing of business plans, proposals, etc.

Rule of Four – What You Need to Know About Small Business Financing Credit Cards

Money is not everything. There are travelers’ checks, money orders, and credit cards. When you start your own business, there’s a way for you to obtain much-needed capital, too. This way is called small business financing credit card.

Small business financing credit card, also known as small business starter credit cards, is a great way to keep your personal and business finances separate.

Personal Credit Card Versus Small Business Financing Credit Card
In the past and even at present, lots of entrepreneurs rely on their personal credit to get their business up and running. The problem with this is that they carry the debt from their business into their personal credit cards. Ultimately, they end up hurting their personal credit scores.

This is where small business financing credit cards come in. They offer higher credit limit. Additionally, they keep business and personal expense separate, thereby making it painless to track tax deductions. More importantly, you may write off your small business financing credit card’s finance charges and annual fees.

Why Get a Small Business Financing Credit Card

1. Build Credit

A small business financing credit card is a good way to build a financial history. Your business is a start-up; it’s unknown. This makes it difficult for your business to obtain loans. A small business financing credit card will remedy this. It will provide banks with the spending footprints they need to reassure themselves you’re a responsible borrower.

2. Avoid Intermingling

When it comes to managing your expense, there’s one thing you should always do. Segregate, segregate, segregate. Do not mix business and personal transactions. This might later on create tax and money management problems.

3. Prevent Shoebox Accounting

It is always a nightmare to track business expenditures. With a small business financing credit card, however, you can turn the nightmare into one you can easily snap out of. Your credit card company will provide you with a year-end statement where you can find your transactions summarized, itemized, and categorized. With such a report available, there’s no need to keep a shoebox stacked with receipts.

4. Special Rewards

The credit card industry is so competitive providers fall over themselves to lure borrowers. Accordingly, a reward and discount program for small business credit card users was developed. Every time you use your small business financing credit card, you qualify for discounts and rewards, ranging from office supplies and plane tickets to phone services.

How to Manage Your Small Business Financing Credit Card Effectively

Credit cards, whether personal or corporate, will always be open to potential abuse. Effectively manage your small business financing credit card by:

1. Limiting card hopping

Sure, you qualify for multiple cards, but this does not mean you should sign up. You shouldn’t. This will only tempt you to overspend. It will hurt your credit rating, too.

2. Steering clear of cash advances

Never use this credit card feature unless you need to bail yourself out of jail. It comes with whooping credit card fees and interest costs.

3. Avoiding late payments

The more delinquent your payments are, the higher the fees and interest rates you would be saddled with. Moreover, late payments hurt your credit reputation.

4. Using grace

Many companies offer a 21-day grace period to clients before asking them to pay for purchases. Turn this to your advantage by drawing up a schedule of your purchases and payments.

Use your small business financing credit card prudently. Remember, credit cards should be a financial safety net, not a trap.