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Sources of Small Business Financing
- Leasing Companies. Leasing companies are a way to finance computers, office equipment, phone systems, vehicles, and other equipment. Leasing can lower your start-up costs because you won't have a large initial outlay of cash for the equipment.
- Customers. If you have existing customers, they may be willing to pay you in advance for your products. This allows you to use their money to purchase products or inventory prior to sale.
- Trade Credit. Vendors and suppliers are often willing to sell to you on credit. This is a great source of financing for both start-up companies and growing businesses.
- Small Business Investment Centers. Small Business Investment Centers (SBICs) are licensed and regulated by the SBA. SBICs are privately owned and managed investment firms that provide venture capital and start-up financing to small businesses.
- Venture Capital Firms. Venture capitalists provide funds to companies that they believe have exceptional growth potential. Very few small businesses are able to obtain financing through venture capital firms.
- Investment Banking Firms. Investment bankers "take companies public." That means that the investment banker offers stock (an ownership interest) in your company to the public. This option is generally only available to small businesses that have very strong growth history and very strong growth potential.
- Private Placement. A private placement is an offer of stock (the stock gives the buyer an ownership interest in your company), or debt (you owe the holder of the debt instrument, much like a loan) to wealthy individuals or venture capitalists without going public.
FAQs
- I think an investor may be interested. What do I need to consider?
- Are there any government programs that will help me?
- I've heard that my state offers special loan programs. What are they, and how can I find out more about them?
- What do I need to consider if I want to get a loan from family and friends?
- How do I go about financing my business?
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