Finance_1905

Money is the mother's milk of any startup. Access to capital often determines whether a fledgling enterprise succeeds or dies in infancy. There are several common types of business financing options available to young companies.

Commercial Banks
Commercial loans are attractive because they don't require entrepreneurs to turn over equity or company control. But servicing debt can drain a young company with limited cash flow. New companies may not even have access to bank loans if they have no operating history and no collateral to secure the loan.

Small Business Administration
SBA loan guarantees can mean the difference between getting a bank loan and being entirely shut out. The federal agency loans no money directly. A business must first show that it cannot obtain conventional financing at reasonable terms. Business owners must personally guarantee SBA loans and must also show cash flows sufficient to repay the loan. Most commercial banks offer information about SBA loans.

Home Equity Loans
Home equity loans are a cost-effective alternative to other types of loans because they offer some of the best interest rates available. But you may not want to risk your family home to launch your business venture. Before going this route, you should carefully consider the risks involved.

Credit Cards
Cash advances from credit cards are an easy and quick way to gain access to cash. But as a long-term financing method, they can be expensive—credit card interest rates typically run much more than the 1 to 3 percent.

Equipment Leasing
Equipment lease financing is an option for many cash-starved businesses. Equipment leases give you access to many types of equipment—computers, copiers, fax machines, cars and trucks—without tying up your cash or credit lines. Although it doesn't bring in cash, leasing reduces the amount of cash you otherwise have to raise. Leasing generally proves more costly than buying in the long run, but if cash flow is an issue for your company, it's definitely something to consider.

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