An introduction to business finance

If you've recently started a business, you know that it takes a great deal of time, preparation, and money to get it up and running.

Even if you've raised or borrowed enough money to start your business, however, it is still just the beginning. You will still need capital to keep your business running, especially when the business is new and you are still building up a customer base and clientele.

There are a number of ways you can get the needed capital to keep your business running. One of these options is a short-term loan. These are typically used for just a few months to provide money for new equipment or to provide working capital during a busy period of time. This is a common type of loan for small businesses.

It is not always easy to get a short-term loan, however. The following are some things a lender will take into consideration:

• Collateral. A lender will want to know what kind of collateral you can provide before lending you money. Established businesses usually won't have a problem with this, as they can offer property, accounts receivable, or different kinds of equipment when applying for a secured loan. If you are applying for a short-term unsecured loan and your small business does not yet have anything to offer as collateral, collateral falls to the responsibility of the owners, in which case they may offer their homes, savings, or other things. Keep in mind that this is quite a risk to take, so make sure you are prepared to accept the ramifications should you be unable to pay back the loan.
• Credit history. Lenders will pay special attention to your credit history as well. This is similar to looking at the credit of someone who is applying for a home mortgage. Negatives or collections on your credit score may make it impossible for you to get a short-term loan, so make sure your credit history is up to par before going through the application process.

The following are other things you should know about business finance.

Credit cards
If you are in a cash crunch, a credit card is another way to get needed capital to keep your business afloat during the beginning months or slow periods. It is important that you shop around, however. Many credit cards offer no interest financing for a period, so it wouldn't be unwise to make charges, then pay off the balance when you start making more money again. In addition, look for a card that offers other perks as well. Many cards will give you a percentage back on your balance, frequent flier miles, and other perks for using your card.

Take inventory
Occasionally, you will need to look through your products and services and determine if there is anything you are offering that is not bringing you any money. In some cases, you can save money and increase your capital by stopping production on things that are not generating revenue for you.

Borrow
If you have sympathetic friends or family members who will help you with capital to keep your business running, consider approaching them. Keep close track of how much you owe and to whom, and set up payment dates and keep a running total of how much has been paid and how much is still owed, as you would with any other loan.

Keeping a new business running requires capital. The above are a few ways you can get needed capital to keep your business running.

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