Financing Your Very Small Business

cash Very small business owners often face unique problems, challenges and risks in starting and growing their business. One challenge is raising the money needed for business start-up or growth. Business start-up often requires one-time expenditures for equipment, utility deposits, inventory or supplies.

Some very small business owners can provide business start-up or growth funds from their own pockets, while others need to tap into outside sources. What types of outside funding is available? Where does this outside money come from?

Outside funding can take two forms:

Debt - borrowing money from a person or a financial institution.
Equity - an investor provides funds and usually takes a percentage of ownership.

Friends or family may be a good source of debt or equity.

Banks make small business loans. You will need good personal credit, collateral, cash flow from the business to repay the loan and money of your own to invest in the business or project. On installment loans you make regular monthly payments to pay back the principal and interest on the loan. Banks also offer lines of credit for short term financing. The bank will pre-approve a sum of money that will be available for you to draw on when you need to pay operating expenses such as for inventory or supplies, but don't have the cash. When cash comes in from your business, you pay the money back.

If you fall short of meeting bank loan standards there are two non-traditional sources of debt in central Indiana:

Indianapolis Microloan Fund (IMF)
SBA Community Express Loans

Need more information on loan sources for your small business? Attend our workshop, Does Your Business Need Cash? Loans for Small Businesses? Or, speak with one of our business counselors.