Business Strategies

Starting or expanding a business nearly always takes money. Where it comes from affects who controls your company, how much you owe and how much risk you carry. Understanding the main sources helps you choose the right one.

Know How Much You Need and Why

Before approaching anyone, work out how much money you need, what it will be used for and how it will produce returns. Separate one-time costs, like equipment, from ongoing working capital. Lenders and investors will expect a written plan and realistic projections. See our business plan services if you need help preparing one.

Debt Financing

Debt means borrowing money you must repay with interest, while keeping ownership.

• Bank loans and lines of credit. Often the lowest cost, but lenders typically require good credit, collateral and a track record.
• SBA-backed loans. The U.S. Small Business Administration guarantees part of certain loans made by participating lenders, which can make approval easier.
• Equipment financing. The equipment itself serves as collateral.
• Business credit cards. Convenient for small needs but expensive if balances carry.
• Online and alternative lenders. Faster, but often with higher costs, so read the terms carefully.

Equity Financing

Equity means selling a share of ownership in exchange for money. You do not make loan payments, but you give up some control and a share of future profits.

• Friends and family. Easy to access, but put terms in writing to protect relationships.
• Angel investors and venture capital. Suited to businesses with high growth potential, and they usually expect a say in major decisions.
• Partners. A new owner can contribute cash and skills.

Selling ownership interests can trigger securities laws, even for small private raises, so get proper legal advice. The entity you choose also matters; see our formation services.

Other Sources

• Your own savings and retained profits. Reinvesting earnings avoids debt altogether.
• Customer deposits and supplier terms. Improve cash flow without borrowing.
• Grants and local programs. Some are available for particular industries or communities.
• Crowdfunding. Can work for products with a public following.

Choosing the Right Mix

Compare cost, repayment terms, collateral, personal guarantees and the loss of control. Avoid borrowing in a way that threatens your home or personal finances unless you fully understand the risk. Match the type of money to its use: short-term needs call for short-term financing, and long-term assets for long-term funds.

Be Prepared

Keep clean financial statements, tax returns and a clear plan. Funders respond to businesses that know their numbers.

If you are considering outside financing, reach out to our firm to talk it over.