Financing your Small Business

May 5, 2015 8:42 am

According to the latest research on small businesses, 145,000 new businesses start up each year in this country and more than 50% of those disappear with in the course of five years.  (Source: Small Business Administration) What causes these businesses to fail at such an alarming rate?  There are a number of critical reasons why small businesses fail, including: poor marketing strategies, dueling partners, a sluggish economy, or an inability to keep up with the pace of technology. “However, the number one reason people fail is, they run out of money,” said David Goldin, CEO and president of AmeriMerchant, a provider of merchant cash advances. With financing being the most challenging obstacle an entrepreneur has to overcome when starting a business, let’s examine financing options for your burgeoning business.

  • Small Business Administration Loan – The Small Business Administration (SBA) offers a couple of types of loans that can help entrepreneurs get the capital they need to start their business: the 7(a) guarantee small business loan and the 504 fixed-asset small business finance program. For a list of SBA financial assistance and loan eligibility requirements read more. In order to qualify as a small business, your firm needs to meet the government’s definition of a small business for your industry and can not fund the business on their own.
  • Bank Loans – Lending practices and standards have gotten much stricter in the past few years but some banks have funds specially earmarked for small business funding.  Banks such as J.P. Morgan Chase and Bank of America have such programs so it may not hurt to inquire about the eligibility for your small business to get in on the action.
  • Personal Assets and Savings – Home equity loans or a personal loan on a 401K are two ways that a small business can get themselves started off on the financial “right foot”.  However, there is a major caveat to using a 401k or equity in your home.  If things don’t pan out, not only do you lose your business, but your nest egg, too.
  • Family or Friends – Asking friends and family, while a humbling process, may be an option for businesses to get off the ground.  Use an experience attorney to help you structure the loan and repayment plan.  Remember you are risking their financial future and jeopardizing important personal relationships.
  • Crowdfunding or Crowd sourcing – There are many reputable crowdfunding sources out there that can help you with financing your new venture.  A crowdfunding site like or Indiegogo can be a fun and effective way to raise money for a relatively low cost.  Remember that this is not a long term solution but may be just enough to get you started or fund a special project to get your brand name out there. Read all the fine print before you sign up for this program and be sure you know what your responsibilities are.

Categorised in: