Financing Options

Understanding the Options of Financing a Business

With so many options available for financing a new business, it’s more important than ever to ensure your funding strategy is appropriate for your individual needs. One mistake entrepreneurs often make is underestimating their capital requirements. As a result, under-capitalization remains one of the most common reasons businesses fail today. Many entrepreneurs believe they only need enough capital to cover their startup costs and open the doors. Then after that, their customers will keep them open and profitable. Unfortunately, that is not always the case. Every new business has a breakeven point – that moment when the cash received as income, is enough to cover all of the operating expenses. Until that moment, the business has to operate at a loss. There must be adequate reserve working capital available to get the business to “breakeven” and beyond. Sometimes that “breakeven point” is further down the road than the owner anticipates, and his/her resources are not sufficient enough to get the business there.

Fortunately, today there are a variety of financing options and programs available to fit almost every entrepreneur’s unique financing needs. Understanding the pro & cons of the available options is an important step in determining the best solution to fund your business venture.