DEBT FINANCING

Short-Term Financing Sources

• Overdraft protection
• Letter of credit
• Short-term loan

Long-Term Financing Sources

• Long-term loans
• Leasing
• Short-term loan

Long-Term Financing Considerations

• May be required to post collateral

Loan Sources

• Traditional banks

Loan Considerations

• Must be “credit ready”
• Often a lengthy and time-consuming process
• Considerable financing costs

Microloan Sources

• SBA

Microloan Considerations

• Provided to help small businesses & not-for-profits
• Can be used for working capital, inventory, furniture & equipment
• Cannot be used to pay debts or to acquire real estate
• Maximum 6 year payback period

Credit Card Sources

• Banks
• Credit Unions
• Financial Institutions

Credit Card Considerations

• Easy access to small funds for an urgent need
• Source of working capital
• Purchase necessary equipment

Export Loan Sources

• SBA Export Loan Programs
• SBA Export Working Capital Loan
• SBA International Trade Loan Program

SAVINGS, RETIREMENT AND OTHER INVESTMENT ACCOUNTS

Savings Considerations

• Life-savings may be at risk

Retirement Sources

• Rollovers as Business Startup (ROBS) program – 401(k)
• Plan becomes part owner of the business

Retirement Considerations

• Business may be required to incorporate
• Rollover may be tax-free
• Does not require a credit history
• Life savings may be at risk

Investment Sources

• Stock investments
• Real estate investments
• Other investments

Investment Considerations

• Consider lost income from investment
• Consider costs (including tax costs) of liquidating investment

Reverse Mortgages and Home Equity Loan Sources

• Equity in business owner’s house may be used to finance a small business

Reverse Mortgages and Home Equity Loan Considerations

• Business owner must be above 62 to qualify for reverse mortgage
• Loan is repaid only in case of owner’s death or if house is sold
• Equity in house is lost if business fails

Family and Friends Considerations

• Viable and easy sourc of financing
• Quicker access to funds
• Potential for family squabbles

PUBLIC & GOVERNMENT

Crowd Funding Sources

• Collective cooperation of people who network and pool their money and resources together

Crowd Funding Considerations

• Creates community awareness and publicity for business venture
• Time involved in financing is minimal
• Increased pressure to make profits

Grant Sources

• SBA

Grant Considerations

• Grants do not have to be paid back