Ask the Experts
Operating Day to Day
For a brand new business owner, there’s nothing like the thrill of opening day — your name on the door, customers streaming in, sales ringing up. But then the weeks go by and reality sets in. Sales aren’t what you expected; your “perfect” assistant just gave notice; and the money you budgeted for advertising isn’t nearly enough. Welcome to the world of operating a business day to day.
Finance Your Dream
Every business, no matter how big or small, requires money to get off the ground and to keep running. And no matter how much you start with, there may come a time when you need to go looking for more. As a new entrepreneur with no track record in running a business, your funding choices are limited:
You can self-finance … First option when your business runs short of money is to take a serious look at your personal financial assets. Can you withdraw funds from savings? Cash out your stocks? Sell your boat or luxury auto? Downsize your standard of living? Take out a second mortgage? If all else fails, there’s always your credit card. Many small businesses have charged their way through the early years of operation, but beware of exorbitant interest rates. Use a card with favorable terms and make every payment on time.
… or, you can borrow the money you need. Commercial loans to businesses are approved based on the owner’s capacity to repay as indicated by past business experience, personal credit rating and collateral. A carefully crafted business plan that makes a strong case for your company’s potential profitability can improve your odds of securing a loan from the following potential sources:
Commercial banks which are generally cautious about financing business startups due to high failure rates. Funding options vary from bank to bank, and small businesses may find those that are locally-owned and -operated most receptive to their needs.
Credit unions which offer many of the same products and services as banks, typically feature higher interest rates on deposits and lower rates on loans. As nonprofit institutions, credit unions are supportive of small businesses and place emphasis on personal service.
Commercial finance companies which may take higher risks than banks and, as a result, typically charge higher interest rates. These firms customarily evaluate loan applications more on strength of collateral than a company’s track record or profit potential.
Loan options specifically for small businesses
The U.S. Small Business Administration (SBA) works with lenders, community development organizations and micro-lending institutions to provide loans to small businesses. SBA-guaranteed loans generally have rates and fees that are comparable to non-guaranteed loans and typically feature lower down-payments, flexible overhead requirements and, in some cases, no collateral requirements. In addition, some SBA-guaranteed loans come with continued support to help recipients start and run their businesses. Applications for SBA loans are treated like any other commercial loan application; demonstrated ability to pay the money back is the primary consideration, and the decision to approve or disapprove a loan application rests with the lending institution, not SBA.
For information on loan types, eligibility requirements, lending sources and other concerns, visit the Florida SBDC office nearest you.