Where does a small business obtain financing?

8th Nov 2009 by Amelia Timbers

In the ideal case, small businesses finance themselves through their own cash flow. However, this is certainly not the common means. Small businesses often gain financing from their owners' assets and the invested funds of friends and family (equity) and loans (debt). Debt financing comes from banks, equity financing comes from investors (personal relationships or venture capitalists). Debt financing can be difficult to come by because new businesses lack the credit and cash flow that engender lender support. For this reason, the Small Business Association's loan programs may be helpful in obtaining debt financing where commercial lenders look for larger, more reliable deals. You can build a lender's confidence by maintaining cash flow or have reason for strong cash flow projections; by having a list of customers who have expressed interest in your product; by having current customers.

This answer is the subjective opinion of the writer and not of FinancialAdvisory.com