Financing Options for Small Businesses

Small business owners sometimes find themselves unable to take advantage of opportunities because they lack the necessary financial resources. This often puts them at a disadvantage especially when they have to go against bigger corporations with deeper pockets. One solution that could put them on equal footing with big leaguers, at least in terms of funding, is a business loan. There are institutions that provide various financing options for small business owners. The fund from these business loans can be used for various business purposes including expansion, building construction, equipment purchase, and purchase of inventory. As each business would have different financing needs, it is necessary for the business owner to consult with a financial advisor or a financing consultant to determine exactly what kind of business loan he should avail of.

small business financial options

To get the best possible financing package, small business owners would have to ensure that the company is in good financial condition. They might not have much in capital, but their books should show that they are not on the red. Business plans are sometimes required by the financing company to determine the extent of risk that they are taking on when they lend money to the company. These plans should show how much the company is expecting by way of revenues in the coming months and years. The better the prospects are and the more realistic the projections look, the more likely the business owner will get the loan package he is applying for.

Financing options come at a cost. Business owners have to pay these loans back with interest. It is, therefore, not wise to get a loan unless it is absolutely necessary. There should be a clear purpose for the money that will be borrowed. And, the purpose for which the money would be used for should yield revenues that exceed what the borrower would have to pay in interest. Otherwise, the businessman would not benefit from such a financing package. Diligent and realistic number crunching is recommended before a businessman takes on financing options.

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  1. For me, one should be financially ready if they wanted to start a business be it small or big. Personally, I would rather borrow money from my parents or relatives as they don’t give you high interest.

  2. Thanks for sharing this article of yours. I am really forward into starting our own small business and I am looking for financing options here and there. Thanks for the reminders!

  3. It is very important to balance the need for capital and the capacity to pay off a loan.

  4. Business is synonimous with loan. Being one of those family with business, I know how hard it is to run a business without money.

  5. I am a few more years from retirement but already I am thinking of putting up a small business. I plan to use part of my retirement money as capital…no loans for me 🙂

  6. Mai Flores says:

    My college professors were actually impressed with the business proposal that I presented to them. They instantly encouraged me to start the business. But the first thing that I questioned was the funding. True enough, they were able to advice the same type of financial consultation. Sadly, I failed to pursue that business then. At least, I know how important a ‘business proposal’ is.

  7. There are really products that small and medium enterprises can run to in times of need or for expansion. With good credit background for sure they can get those options.

  8. true! getting loan shud really help in the business though make it sure that the company generat higher income

  9. The rule in business is that if there is an opportunity that you can finance and the opportunity is real and sure – get a loan!

  10. Loans can really boost a business but the rule of thumb is borrow only if you can generate more profit compared to the interest.

  11. Thanks for the info about business loans now I know what to do if ever I decide to start my own business.

  12. I agree, get a loan when you know you could pay it, like there is a stream of income to pay it off.. otherwise, debt could be irritating!

  13. You know what’s sad? Plenty of SMEs open/start up without even THINKING of how to manage finances. The end result is failure, and a jaded, pessimistic attitude towards self-owned business. Such a shame. Thanks for sharing this post!

  14. I really need to step my game up for the financial side of my life. 🙂

  15. Mark Joseph Gesite says:

    this is really true when you wanted to leap a little higher in terms of investment. being a risk taker can bring you to a higher level but sometimes it can also lead to a disaster.

  16. Rochkirstin Santos says:

    How about instead of loaning, brilliant small businesses can get the approval of venture capitalists to invest in their business and share the profits later on? This is a good practice benchmarked in many companies now using high capital in such an early stage.

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