6 Ways to Finance Your Small Business

Women are starting businesses at a rapid rate. As a member of several women’s associations, I am frequently asked how women can obtain financing for their businesses. I’ve heard accounts from women stating that they have used their savings, credit cards and home equity. 

According to the National Women’s Business Council (NWBC) 2012 report approximately 55% of women-owned firms used their personal/family savings to start or acquire a business. If you are looking for loans of any type, but aren’t secure enough to put your savings on the line, then no one else should be expected to invest in your risk. Provided below are six (6) other ways to finance your business venture. 

  1. Investors – Look for a professional angel investor, who will typically complete a thorough due diligence. If an entrepreneur is considered by an angel group, a rigorous application process is the norm. The level of risk an angel investor takes will depend on the experience and skill level of the entrepreneur. An angel investor will expect a seat on a start-up company’s board of directors, as well as provide input on how the business progresses. It’s clear that funding is available for a small business that is able to meet the requirements. 
  1. SBA Loan Programs – Some business owners think that Small Business Administration (SBA) loans are funded by the government. This is not true. SBA loans are made by commercial lenders, such as banks, credit unions, or micro lenders who are provided a guarantee you will repay your loan as promised if approved. Before you seek financial assistance, you should thoroughly assess your current financial situation and the business’s ability to pay back the loan. These loans depend on the type of funding you are seeking and what assets you can provide for collateral. Effective management is an important element of business. Your lender will be looking for a strong managerial presence along with several other factors. 
  1. 7(A) Business Loans – Includes financial help for businesses with special requirements, such as, businesses that handle exports to foreign countries, businesses that operate in rural areas or any other very specific purpose. 
  1. CDC/504 Loan Programs – The 504 Loan Program provides approved small businesses with long-term, fixed-rate financing generally used to acquire fixed assets for expansion or modernization. 504 loans are made available through Certified Development Companies (CDCs), which are SBA’s community based partners for providing 504 loans. A CDC is a nonprofit corporation that promotes economic development within its community through the 504 Loan Program. CDCs are certified and regulated by the SBA. 
  1. Microloan Programs – Provides small, short-term loans to small businesses and certain types of not-for-profit child-care centers. The SBA makes funds available to specially designated intermediary lenders, which are nonprofit community-based organizations experienced in lending, as well as, management and technical assistance. These intermediaries make loans to eligible borrowers. The maximum loan amount is $50,000, but the average microloan is about $13,000. Microloans may be used for working capital, the purchase of inventory, supplies, furniture, fixtures, machinery or equipment. Proceeds from a microloan cannot be used to pay existing debts or to purchase real estate. 
  1. Factoring – Factoring and purchase order financing can provide you with the working capital you need to meet your obligations and grow your business. There are several financing products for different industries.