Article written by; Back on Track Solutions (www.getbackontracknow.com), is a consultancy that provides customized business enhancing solutions for small businesses. Barbara Goldberg will analyze, evaluate, distill and then solve the problems challenging small business owners, allowing them to get back on track to servicing customers.
When it comes to small business financing one size does not fit all. Before determining what financing is needed, questions need to be asked. Is the business a start-up? Do you need to add more funds to it? Do you need funds to repair or rebuild the business? Answering these questions as well as understanding the different forms of financing available can go a long way in helping determine the proper financing fit for your business.
There are several forms of financing available. Understanding the nuts and bolts of them will help you determine which is the best fit for your business.
A small business loan allows the business owner to borrow money from a lender. In borrowing the money, the business owner is indebted to the lender not only for the funds borrowed but also interest accrued.
There are several types of loans, secured or unsecured, long-term or short-term, SBA backed, line of credit. The list goes on. Understanding the specifics of the types of loans available will help immensely in determining whether the loan route is the correct one to be taken. Here are several loan options that are available:
SBA Loan: The Small Business Administration doesn’t offer money directly to the business owner. Instead, they offer different programs that are targeted towards the specific needs of a business.
Fixed Rate Loan: This type of loan can be applied for from a bank. It allows for the business owner to apply for a specific amount that is repaid monthly along with interest.
Line of Credit Loan: This is a short term loan obtained through a bank. It allows the business owner to access a specific amount of funds when needed as opposed to taking out a lump sum. There are upfront fees usually required to set this up as well as interest due on the amount used.
The government as well as not-for-profit and private organizations have set aside funds to be awarded to small business owners to help start or expand a qualifying business. Although this is not a loan and doesn’t need to be paid back, there are guidelines that need to be met and agreed to prior to the grant being issued. Here are several options that are available:
Government Grants: Since these grants are funded by tax dollars they have strict rules and reporting measures associated with them. There is usually a lengthy application process to qualify for a government grant and detailed progress reports required once the grant is issued.
Not-For-Profit and Private Grants: These grants are specific in nature, such as technology or market based. They may not necessarily be monetary in origin and usually require either matching funds by the business owner or have it combined with some form of a loan.
These are funds provided by investors for new business ventures that are perceived long term growth possibilities. Potential businesses looking for this kind of investment have limited operating history as well as difficulty obtaining funds in more traditional manners. The venture capitalist usually have a say in the business as well as a portion of the equity. For them its all about big risk and even bigger reward.
This type of funding is usually provided as seed money for a new business or money to assist through a difficult time. The investor is more concerned about seeing the business succeed rather than benefiting financially from its profit.
As shown above, there are a multitude of options available to finance a small business. Due diligence must be done in educating yourself as to which is the right option for your business. To learn more about these available options, check out the links below:
SBA Loan Programs
SBA Disaster Loans
Facts About Government Grants
SBA Loan and Grants Tool
Amber Grants for Women
Intuit Loan Finder
Disclaimer: The above links are provided as a courtesy to the reader. Any information obtained from these links does not constitute or imply an endorsement by Back On Track Solutions. The views and opinions expressed in any referenced link do not necessarily state or reflect those of Back On Track Solutions or Social Brothers.