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Dollars and Sense

According to the Small Business Administration (SBA), companies don’t fail because they have a poor product; they fail because they have insufficient startup capital. Experts recommend that new business owners have access to enough money to cover operating expenses for at least a year--that’s on top of expenses such as equipment purchases. These expenses include monthly utilities, your salary as the owner, personnel costs, and money to repay your loans. Consult an accountant to help you predict your monthly outflows.

So where are you going to get the cash to finance this project? You have several options:

  • Your own funds

  • Partners

  • Banks and other loan sources (commercial finance companies, venture capital firms, local development companies, and life insurance companies)

When borrowing money, lenders will ask 3 questions: How much money do you want? How are you going to use it? How are you going to repay it? This is where the all-important business plan comes in. It includes much of the information the lender requires, including financial projections, a business overview, and a description of your experience and management capabilities.

Quick tip: If your loan applications are declined by 2 or more banks, ask the banker to make the loan under the SBA's Loan Guarantee Plan or Immediate Participation Plan. You also may be eligible for special programs for minority- or women-owned businesses. Refer to the SBA’s finance section for more information.

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