Tips – Debt Financing
There are many sources of financing: banks, savings and loans, commercial financing companies, and SBA is the most common.
State and local governments have developed many programs in recent years to help small business growth in recognition of positive effects for the economy. Family, friends and former colleagues all potential sources, especially when capital requirements are small.
Traditionally, banks have become the largest source of financing. Its main role has been offering short-term loan borrowings, seasonal credit lines, and special purpose loans for machinery and equipment. Banks generally have been reluctant to offer long-term loans for small businesses.
SBA guaranteed loan program and encourages bankers and non-bank lenders to provide long term loans for small businesses by reducing risk and multiplying their funds. SBA programs are an integral part of the success stories of the thousands of businesses nationwide.
In addition to equity considerations, lenders usually require the borrower’s personal guarantees in case of non receipt of payment. This ensures that the borrower has a sufficient interest to give maximum attention to the business. For most borrowers this is a burden, but also necessary.
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