The Best Path To Small Business Funding

by : David Castro



From time to time, many businesses need to be able to find small business funding. It could be that things have been going well with your company and you are looking at financing an expansion project to take advantage of the potential for growth in your business, or it could be that your finances have taken a turn for the worse. Sometimes through no fault of ownership or management, the economy slows down, and sales begin to drop. When that happens your businesses cash reserves can become depleted, and your cash flow dries up. Without adequate cash flow, your business will die. When that happens, you need to be able to find a good source of small business funding to keep things moving in the right direction.

If your business is already established with a solid history of profitability and good credit, finding small business funding should not be too difficult, especially if the business has a relationship with a local bank. Depending on the amount that you want to borrow, it is typically just a matter of talking with your local banker to get the paperwork started. For smaller funding need of less than $100,000, many financial institutions do not require business plans, or any detailed reports of how the financing will be used. For larger amounts of money, the amount of supporting documentation that is required by the lender will increase. The amount of documentation required and the amount of money that will require additional documentation will depend on the lender. While there are many similarities between banks, the specifics will vary from bank to bank.

If your business has not been around very long, or if there have been financial and credit problems in the past, you may need to seek out one of the many lenders that specialize in unsecured loans in order to find the small business funding that you require. There are financial companies that focus on lending to businesses that may have been turned down by traditional lenders. These forms of financing are usually structured a little differently than conventional business loans, and the rates of interest will be higher, but the requirements to qualify for the financing are much lower.

Most small business funding comes in two forms. The first form is a traditional loan, where the money is transferred to the businesses account in a lump sum. Once the money is transferred, interest begins accruing until the entire loan is repaid. Thi9s form of funding is typically for businesses that have a one time need, and they require the all of money at that time.

The second form of funding is a line of credit. This is great for small businesses that have ongoing need for smaller amounts of financing. With a line of credit an account is set up, similar to a checking account, with a certain amount of money available through that account. As money is needed, it can be withdrawn from that account. Interest is only charged on the amount that has been withdrawn. If more money is needed, the business simply withdraws more from the account.

Finding appropriate financing is an important aspect of many businesses. For some, the ability to find the right small business funding is the difference between success and failure.