Although the reason many people start a business is to gain economic independence, most new business owners put little effort into financial planning. They have the mistaken belief that it will not be difficult to raise additional money if their business is doing well and making a profit, or if their idea is a sound one. Whatever reason you have for getting into business, you will not stay in business long unless you make a profit or have an independent source of financing. Keep in mind, almost any new business will likely require more available money than was originally thought necessary. Most businesses soak up money in ways that were never dreamed of, and if you know and expect this from the beginning, you will be better of in the long run.

 

There are several ways to finance a business. Nearly seventy-five percent (75%) of small business owners obtain funds through FFA - Friends, Family and Assets. Others, 25%, utilize local lending options, which involve applying for loans. Whatever your financial situation, it is important to do your research thoroughly in order to take full advantage of the choices available. All businesses have risks and opportunities blended together, so wherever you go to find financing, present a good plan that demonstrates your, and the company's, ability to reduce risk and profit from the opportunities.

 

Our discussion of money as it relates to the small business person focuses on the basics of borrowing, including the importance of the credit report and other items that must be considered when applying for a loan. We also address different financing sources including both loans and grants. This area wraps up with a brief look at the importance of a thorough business plan when applying for a loan. The business plan itself is looked at in its entirety in a separate section.