How to find financing for your business

Whether you already own a business or are looking to purchase one, finding financing can be the biggest challenge that you face. Finding the money you need, will have to be the result of diligently searching and most importantly doing your research. The good news is that there are several avenues that you can explore, in regards to finding financing, for your business. The first step is to have a plan before you begin your search for financing. If you are an entrepreneur looking into purchasing a business, or you are already a small business owners looking for additional financing, you should understand that there are a few items to consider when seeking financing. Successfully acquiring these items will strengthen your viability as a loan candidate,and your ability to tap into a variety of potential financing sources.

The first things that most lenders will want to do is to review your business plan. They will also want to determine the economic status and value of the business. Carefully review your financials and consider having a trusted financial advisor also review the numbers. You will also need to ascertain the value of the business,(whether you already own it or want to buy it) and this needs to include any equipment, real estate, inventory and other assets.

To additionally increase your viability as a loan candidate, you will need to convey your industry expertise,and any management know-how to your potential lender. Lenders understand that they are not just investing in ideas, and they will be looking for candidates, who exhibit strong potential for business success. Potential lenders will want to see exactly what you plan to do with financing for your business.

If you are seeking financing to buy a business, you will need to show lenders that the transition period will run smoothly. You may want to consider keeping existing managers on staff to help ensure an easy transition. Seasoned employees can also help you learn the inner workings of the business and help secure extended contracts with existing customers.

There are a number of different ways to obtain financing. Here are a few of the options-

• Family, friends or "angel" investors-It is important to keep in mind that lenders will likely expect the borrower to provide between 20 percent and 50 percent of the capital upfront. If you do not have the initial capital to invest in the business, you can consider borrowing from family and/or friends. Another investment option may be "angel" investors. These are wealthy individuals who make equity investments in businesses at the early stages. One of the major benefits of this type of investor is that they typically have expertise in the fields of businesses in which they invest, and can also offer their resources and contacts.


• Seller financing-If you are purchasing an existing business, you may want to consider asking the seller,if he or she,can provide financing for the sale of all or some of the business. In some cases, sellers may be able to provide a very reasonable interest rate. Keep in mind that some seller financing can also prompt other lenders to invest in the venture.


• Traditional lenders-It is important to understand that while the industry is still in the midst of a tight credit market, the fundamentals for loan qualification remain important.

These fundamentals include but are not limited to:
1. Demonstrating positive cash flow,
2. Solid management experience
3. Industry expertise
4. Having a strong credit report.
Keep in mind that banking relationships are also a significant part of the equation. It is critical to cultivate and maintain a relationship with your banker, keeping him/her well-informed about your business experience within a particular industry. You should also be aware that many banks, also have special lending programs for women, minorities and disabled-veteran-owned businesses.

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