Small business finance refers to the various means by which an individual or aspiring business owner obtain money to open a new small business, buy an existing small business, or attract investors to provide additional capital to fund future or current business activity. Business finance is a term that can have several different definitions depending on the circumstances. For instance, for a bank, it would be small business finance if the bank provided no money down and only asked for a credit card payment as the starting point of any loan process. On the other hand, a private lender may insist that you first provide some type of collateral in order to secure a loan, such as your car or home.
Small business finance can include a wide range of financial options for business owners. Some of the most popular options are to obtain lines of credit, like personal loans, from a bank or credit union, using vendor accounts, like business credit cards, and receiving lines of credit based upon your past credit history. Many small business owners also decide to use their existing accounting software to help them manage their cash flow and funds. There are several different types of accounting software, so the decision on which to use will depend on what is already in place at your small business.
Most small businesses will prepare their own financial statement and income statement. The income statement, which is usually called the statement of income, will include all of the reported revenue, expenses, and cash flow for a year or the last three years. This financial statement will report a balance sheet that lists assets, liabilities, ownership equity and net worth. The balance sheet is used to show the operations and overall financial condition of the business. Most small businesses use the balance sheet to show their condition on a yearly basis.
Another common option for small business finance is to obtain a bank loan for specific purposes. Most banks offer various types of line of credit and business finance options, from merchant cash advances to business credit cards. If you’re unable to obtain a conventional loan from a bank, you may want to explore the possibility of obtaining a small business loan from a private lender. A private lender may be able to provide you with a specialized type of financing solution, especially if you have unique or specialized need for small business finance.
There are a number of private lenders who specialize in providing small business loans. These lenders can provide you with the money you need and they understand the complex regulations and documentation required by government-sponsored programs. You’ll want to compare the rates and fees between many different financing options before you make your final decision. Be sure to shop around, visit lender websites, and talk to representatives from different lenders to find the best financing options.
Many lenders may offer business finance options that include short-term or long-term financing options. If you are a business that is expecting to receive a small amount of revenue in the near future, you may be able to obtain a short-term loan from one of these lenders. Typically, this will be at a very affordable rate. For larger businesses, a long-term loan may be more appropriate.