One key to successful business expansion is your ability to obtain and secure appropriate financing. But as many quickly discover, raising capital may not be easy; in fact, it can be a complex and frustrating process.
However, if you are informed and have planned effectively, raising money for your business will not be a painful experience. Professional guidance should be considered in this quest, especially as to the financial information for the loan proposal.
Finding Sources of Money
There are several sources to consider when looking for financing. It is important to explore all of your options before making a decision. These include:
Banks and Credit Unions. The most common source of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound.
Venture Capital Firms. These firms help expanding companies grow in exchange for equity or partial ownership.
Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: “High Risk!” To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it, and how you will pay it back. You must be able to convince your lender that you are a good credit risk.
Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term.
A short-term loan generally has a maturity date of one year. These include working-capital loans, accounts-receivable loans and lines of credit.
Long-term loans generally mature between one and seven years. Real estate and equipment loans are also considered long-term loans, but may have a maturity date of up to 25 years. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.