How to Finance a Small Business

How to Finance a Small Business. Many sources of funding exist, but which one you choose will depend on a variety of factors.

Decide how much money you need to start or expand your business.

Write a business loan proposal that outlines your company's financial history and projected profits.

Get a credit report.

Apply for a bank loan if yours is an existing business. Banks typically do not lend to start-ups.

Apply for a Small Business Administration secured loan. Start-ups may need significant assets and capital to qualify for one.

Opt for one of the Small Business Administration's loan programs designed to provide start-up capital or, if you fall just short of qualifying for a bank loan, to purchase commercial real estate.

Consider a personal loan if you require only a small amount of money or have poor credit.

Apply for a line of credit at your bank if yours is an existing business in need of a flexible source of capital.


  • Contact the Small Business Association to find out what loan options are open to you. Develop a history with your bank before applying for a loan. Time your loan proposal to coincide with an upturn in the industry. Banks are hesitant to loan money to businesses that are part of an industry in a downturn. Include interest in a personal loan, or the Internal Revenue Service may treat it as a gift.


  • Pin down banks on exact fees and interest rates. Every request for a loan or line of credit will show up on your credit report, so plan carefully. Avoid personal loans if you are uncertain you will be able to repay them.

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