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Where Can Your Small Business Find Financing?

As a budding small business owner, a lot of your time will be spent thinking about money – specifically, figuring out how much is coming in, where it’s coming from and when. That starts from day one, when you’re determining how to finance all your startup costs, and continues as you look for ways to fund growth – whether it’s hiring new employees, buying equipment or expanding into bigger facilities.

The good news? Many small businesses don’t need a lot of capital to get off the ground, with average costs surprisingly low, according to a recent survey.

But whether your need is large or small, you’re almost certainly going to have to dredge up cash from somewhere. The question is: Where?

Here are a few common sources of small business financing.

You, Your Friends and Your Family: The first place you can look is relatively close by. In some cases, people make personal investments in their own businesses, taking a small chunk of savings to start up their company. Believe it or not, this is an attractive source of funding because it proves to other would-be investors that you have more skin in the game than just your imagination … making it a little more likely for them to back you. But past that, also consider looking to your friends and family as early sources of capital. You might be lucky enough that a generous, well-heeled family member will simply give you the money, though most funding secured this way will be in the form of a loan. The upside is that you probably won’t face the same stringent qualifications that a bank will need you to meet, you may not need to pay interest and you won’t necessarily have a monthly payment. The very obvious downside is that if you don’t make good, you threaten ruining relationships with your loved ones – so consider this source of funding carefully.

Grants and Subsidies: One of the best sources of funding you can find is a grant or subsidy, which doesn’t require any sort of payback – and you can find this kind of cash from the government, among other places. The U.S. Small Business Administration may be able to help you. They have numerous opportunities that depend on the type of business you are operating, or the type of business owner you are. For instance, there are grants for women-led and veteran-operated businesses, and the federal government also offers up grants for scientific research and development.

Go to the Bank: Bank loans are one of the most well-known and commonly utilized forms of small business funding, though they’re far from easy to deal with. Earning a small-business loan is about more than proving you have a good idea – it’s about showing you have a strong small business plan with attainable goals, not to mention good credit. Just remember: You don’t have to be scared of picking up a bit of small business debt, but you do need to be responsible about it.

Find Your Angel: “Angels” are typically businesspeople that have amassed a significant amount of net worth that they can invest their money – and sometimes, even their time and expertise – in other small businesses. That can be a great deal for fledgling business owners, because while money early on is invaluable, there’s no calculating the cost of an experienced hand guiding you through your company’s nascent stages. Angels typically will ask for equity in return, and will expect high amounts of growth out of the company, so they’re not right for every type of business.

But where do you find angel investors? How do you go about preparing to ask the bank for a small-business loan? And what about venture capital, as well as other types of funding? There are many more questions to figure out during your search for small business financing – and we’re here to help. McManamon & Co. is a full-service accounting and consulting firm that can help you with numerous small business issues, including identifying sources of funding and pitching your case.

You can talk to your rich uncle on your own, but when it comes time to talk to VCs, angels and banks, it’s time to get in touch with us. Call McManamon & Co. at 440.892.9088 or contact us online.

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