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
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