Looking for business financing generally refers to entrepreneurs searching for funding resources for a business. Businesses need capital for start-up and operating expenses, and many financial institutions provide loan programs to fulfill that need.
When looking for business financing, most entrepreneurs go to the Small Business Administration (SBA) first. This government agency supplies funding to business that employ fewer than one hundred workers and that have been denied by traditional lenders, such as banks. Their most common loan program is the 7(a) loan, which guarantees a certain percentage of a loan provided by a traditional lender. The loan requirements for start-up and existing businesses differ somewhat, but both require applicants to supply personal and business financial documents along with a written business plan. If a business meets the criteria for a 7(a) loan, it can download and print the application available on the SBA’s website to give to a lender who participates in the SBA’s guaranty program.
Existing businesses looking for immediate business financing usually turn to factoring. With factoring, a business sells its accounts receivables to another company, known as a factor. Most factors require businesses to process credit cards and to have been doing so for a certain length of time, usually three to twelve months. Once approved, the factor collects the payments on the accounts from the business’s clients until the funds are repaid. Factoring is not considered a loan; therefore, no debt is incurred on the balance sheet.
Looking for business funding refers to entrepreneurs who are searching for ways to fund a small business. Funding is needed for start-up and operating expenses. Many lenders provide specialized loan programs to assist small business owners in starting and maintaining their business.
A majority of entrepreneurs go to the Small Business Administration (SBA) when looking for business funding. This government agency provides loans to small businesses that employ fewer than one hundred workers and that have been denied by traditional lenders, such as commercial banks. Their most common loan is the 7(a) loan. The application requirements for start-up and existing business differ, but both require certain financial documents and a business plan. Certain variations of this loan may require additional documentation. To apply for the 7(a) loan, applicants should collect all needed documents and take them to a lender who participates in the SBA guaranty program. With this program, the SBA will guaranty a certain percentage of a small business loan in order to alleviate the lender from unnecessary risk.
Another source to consider when looking for business funding is a private investor. A private investor will contribute large sums of capital to a business in exchange for a portion of the profits. The best way to attract potential investors is to have a well-written, feasible business plan. Before an investor contributes any capital, it’s best to make sure that he or she is providing equity, not debt. Debt means the investor expects the business to repay all or part of the given capital.