Sources Of Business Financing
you have listed the start-up costs and operating expenses for your
business, you need to look at sources of financing, and then select the
source that best suits your business needs. As an entrepreneur, you
will find several sources you can tap:
YOUR OWN MONEY - This includes the money you have in bank or other
financial institution, as well as money in the form of bonds, GIC
(guaranteed investment certificates) or RRSP's (Registered Retirement
LOVE MONEY - This refers to personal loans
from friends, relatives and or potential employees.
TRADE CREDIT - This type of credit allows
you to buy merchandise from suppliers on credit, with understanding
that you will pay for it in the near future (usually in 30 or 60 days).
MORTGAGE LOANS - If you own your home you
can take out a mortgage on it. Remember that you might lose your home
if your business fails.
PARTNERS - You can take on a partner and
share the start-up costs and other costs.
| GOVERNMENT LOANS
BUSINESS ACT LOANS -The Small Business Loans Act guarantees loans from
chartered banks to small businesses. In other words, the government is
responsible for paying the loan back to the bank if the small business
owner cannot. These loans can be taken out to buy equipment, a
building, or land. They must be secured with the purchase. That is, if
the owner cannot repay the loan, he or she may be required to sell the
asset bought with the loan.
VARIOUS GOVERNMENT LOANS - The government (through the different
programs) offers grants and loans and loan guarantees to businesses
that qualify as exporters or innovators, or businesses that are willing
to locate in areas requiring employment. To qualify for most of the
funds available through the government, the business must provide
ongoing employment and must stimulate economic activity.
| BANKS AND COMPANIES
AND TRUST COMPANIES - Banks are in the business of lending money.
Before granting your business a loan, bank needs to be assured that you
and your enterprise meet specific credit criteria. They are happy to
help entrepreneur who has convinced them of the possible success of a
business idea. If your credit record is poor, you might be considered
too great a risk for a loan.
FEDERAL BUSINESS DEVELOPMENT BANK (FBDB) - This corporation is a lender
of last resort. It will lend money to a new or existing business if the
business cannot obtain funds anywhere else and if it is convinced that
the the business venture is sound.
SHARES - Once a business has grown to a certain stage, it can raise
money from the general public by incorporating and selling shares in
the business. These shares has to be issued under the authority of the
corporate charter and the securities regulations. However, during good
economic conditions this can be an excellent source of funds for a
VENTURE CAPITAL - It is usually long-term and risk capital. Companies
providing venture capital take an equity position (often in the 20 to
40 percent range) and it's doubtful such partners will remain silent,
they'll want to take an active role and consultation on such matters as
financial planing &control, accounting and marketing. Because
venture capital takes a minority position, they prefer firms that have
management with proven ability.
Free Money When You Are Unemployed
- The nation's top expert on free money directs readers to grant funds
available to help finance everything from grocery bills and the rent to
medical expenses. Listed are over 1,000 sources of assistance, complete
with names, addresses, amounts available, and special requirements for
every grant. Includes information on special programs for middle aged
and older Americans.
How to Really Start Your Own Business
- W.D.Bygrave, professor of entrepreneurship, Babson College "Gumpert's
how-to book is simply the best. No would-be entrepreneur should launch
a business before reading this book."