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Dollars and Sense
According to the Small Business Administration (SBA), companies
don’t fail because they have a poor product; they fail
because they have insufficient startup capital. Experts recommend
that new business owners have access to enough money to cover
operating expenses for at least a year--that’s on top
of expenses such as equipment purchases. These expenses include
monthly utilities, your salary as the owner, personnel costs,
and money to repay your loans. Consult an accountant to help
you predict your monthly outflows.
So where are you going to get the cash to finance this project?
You have several options:
- Your own funds
- Partners
- Banks and other loan sources (commercial finance companies,
venture capital firms, local development companies, and
life insurance companies)
When borrowing money, lenders will ask 3 questions: How much
money do you want? How are you going to use it? How are you
going to repay it? This is where the all-important business
plan comes in. It includes much of the information the
lender requires, including financial projections, a business
overview, and a description of your experience and management
capabilities.
Quick tip: If your loan applications are declined by 2 or
more banks, ask the banker to make the loan under the SBA's
Loan Guarantee Plan or Immediate Participation Plan. You also
may be eligible for special programs for minority- or women-owned
businesses. Refer to the SBA’s
finance section for more information.
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