FINDING THE MONEY YOU NEED

There are several sources to consider when looking for financing. It is important to explore all of your options before making a decision.

• Personal Savings: The primary source of capital for most new businesses comes from savings and other forms of personal resources.
• Family and Friends: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture.
• Banks, Savings and Loans and Credit Unions: Provides loans if you can show that your business proposal is sound.
• Federal, State and Local Government Financing Programs: Can provide a variety of loans, grants and incentives towards a business venture.
• Venture or Seed Capital Companies: These firms help expanding companies grow in exchange for equity or partial ownership.

BORROWING MONEY

To be successful in obtaining a loan, you must be prepared and organized. Before discussing financing from a particular source, develop a thorough business plan. Also, prepare complete financial information, usually three to five years of historical financial statements, if applicable, and three to five years of projected financial information. Remember, when meeting with a lender or investor, have a specific reason for requesting the funds and demonstrate the ability to repay.

TYPES OF BUSINESS LOANS

Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term.

Generally, a short-term loans has a maturity of up to one year. These include working-capital loans, accounts-receivable loans and lines of credit.

Long-term loans have maturities greater than one year. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.

HOW TO WRITE A LOAN PROPOSAL

A good loan proposal will contain the following key elements:

General Information

• Business name, names of principals, social security number for each principal, and the business address.
• Purpose of the loan - exactly what the loan will be used for and why it is needed.
• Amount required - the exact amount you need to achieve your purpose.

Business Description

• History and nature of the business - details of what kind of business it is, its age, number of employees and current business assets.
• Ownership structure - details on your company's legal structure.

Management Profile

• Develop a short statement on each principal in your business; provide background, education, experience, skills and accomplishments.

Market Information

• Clearly define your company's products as well as your market.
• Identify your competition and explain how your business competes in the market place.
• Profile your customers and explain how your business can satisfy their needs

.Financial Information

• Financial statements - balance sheets and income statements for the past three years. If you are starting out, provide a projected balance sheet and income statement for three years.
• Personal financial statements on yourself and other principal owners of the business.
• Collateral you would pledge as security for the loan.

The financing of a business venture can come from a variety of sources. But, it requires careful planning and research to determine which sources may be available and appropriate for the particular business. Lending sources often require a 20 to 50 percent equity participation by the business entity because these sources want the business owners to be at a risk with personal resources demonstrating a commitment to the project.

One of the keys to obtaining financing is to be prepared.