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Discover Sources of Money Available to You

You will probably finance your business from two sources: equity and debt. Equity funding is the owner’s cash contribution to the business. It can include personal funds and also funds invested by family and friends. Equity funding is money that remains in the business indefinitely. Unlike a loan, it has no set pay-back schedule.

If you don’t have enough money to start a business on your own, you can turn to various kinds of lending institutions. Generally, you will need to be willing and able to invest most of the initial equity in your business. Lending institutions are typically reluctant to provide more than half the start-up funds for a small business. Any loan you get from a lending institution will have a predefined repayment schedule. Under that schedule you must repay specified amounts of principal and interest within a specified amount of time.

Commercial Loans

Commercial loans are the most common kind of small business loan. They come from your local bank, savings and loan, or credit union. The terms and requirements of these different institutions vary widely. If you’re interested in a commercial loan, familiarize yourself with basic lending terminology and read the pamphlets various lending institutions have available. Then make an appointment with a loan officer. Show up on time, professionally dressed for the business world (not the martial arts world), and present your well-thought-out and professional-looking business plan. After you sell the lender on the potential of your business and your ability to run it, they can help you get started on the loan application process.