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What are the best ways for small businesses to fund themselves?
July 28th, 2011by
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Let’s assume an entrepreneur needs between $100K and $200K to get started, but does not have that in the bank. Further assume the entrepreneur has sufficient funds to work for 2 years without pay, but the $100-200K is needed to get going with the business
Go to a bank(s) and apply for a small business loan(s). Your terms will depend on your credit rating and ability to pay back a loan. Your terms will also, and possibly most importantly, depend on your business plan. So, you must put together, in writing, a well thought out business plan. You must be able to present this in such a way a banker understands (i.e. how you will make a profit and pay the loan back). You will need to develop pro-forma financial statements within your plan. Basically, work the numbers backwords (depending on your business) the average sale multiplied by averages sales per day and you better be able to justify your findings with convincing research. Also outline all expenses you will occur on a REoccuring and ONE TIME basis. This info should get you started.
may look for friends and relatives for a sort of loan that it may be added in the amount needed and tell them that you’ll return the money back with in a year or two or you can tell them that you will be making them as your business associates or partners.
You need a microloan. You can get those through any microenterprise organization in your local area. You also get technical support and possibly mentorship which I suspect you will need as you did not state an exact amount for funding and you did not state whether the funding amount was for a one year period or over a three year period. A microloan can be given over and over again. The microloans are $35,000 and under. Here is the info. Good Luck!
About Microenterprise
Microenterprise Defined
AEO and its members have defined microenterprise as a business with five or fewer employees requiring $35,000* or less in start-up capital. AEO estimates that there are over 20 million U.S microenterprises, which represent 17% of all private employment in the U.S. In addition, microenterprise represents a path from poverty to financial security for many low-income individuals.
* Loans of $35,000 and under are known as microloans.
Microenterprise Development Industry
The estimated 600 microenterprise development organizations (MDOs) operating in the U.S. exist to support disadvantaged entrepreneurs as they start or expand their businesses. MDOs can increase the chance of business success by bridging the gap between disadvantaged individuals and the tools they need to start and grow successful businesses. With the help of AEO services, MDOs offer business training, technical assistance, access to capital, and other services to entrepreneurs to assist them in realizing their dream of business ownership. For many low-income entrepreneurs MDOs represent the only opportunity to access the capital and business tools necessary for business start-up.
Key Elements of Microenterprise Development
AEO has learned that comprehensive microenterprise development programming consists of four key elements: Training and Technical Assistance; Credit and Access to Credit; Access to Markets; and Economic Literacy and Asset Development.
Training and Technical Assistance
Microenterprise development practitioners agree that the quality and quantity of training and technical assistance provided to an entrepreneur can often be the biggest factor in whether the entrepreneur’s business succeeds of fails. Microenterprise trainers have the difficult task of teaching complex business skills to entrepreneurs with little formal training, limited time to engage in learning; and various levels of education.
Though training opportunities vary from organization to organization, typical microenterprise development training topics include: business plan development; integrating technology; bookkeeping and business management; and marketing. Training is offered through various settings including: classroom type lectures; one-on-one counseling; peer networking; and mentoring programs.
Credit and Access to Credit
A significant challenge for many microentrepreneurs is access to capital. Traditional lending sources do not find it profitable to lend $35,000 or less and choose not to. In addition many low-income individuals looking for a path out of poverty through self-employment, have poor (or no) credit history with no hope of receiving a bank loan.
Some microenterprise development organizations (MDOs) offer credit directly from an in-house loan fund, which typically lend amounts from $100 to $35,000 and when granting loan requests look at other factors in addition to the entrepreneur’s credit. Other MDOs partner with other organizations or institutions in the community to provide access to credit. Examples of these type of relationships include partnerships with banks, credit unions, or other financial intermediaries that offer loans and various other financial products.
Access to Markets
The goal of microenterprise development programs is not just to create marginal businesses, but to create successful ones. To help microentrepreneurs increase sales and profitability, many programs create specialized networks of their clients’ businesses, especially in industries where microenterprises are flourishing. These industries, also referred to as sectors, include: specialty foods; jewelry; arts, crafts and gifts; clothing and textiles; furniture; computer technology; daycare; and environmental products and services such as recycling.
Access to market services include: sophisticated training on marketing and sales concepts; development and distribution of joint catalogs; Internet access and e-commerce; trade shows; and business incubators.
Economic Literacy and Asset Development
AEO has learned that low-income entrepreneurs can greatly benefit from increase knowledge of the benefits of banking and saving principals. Many entrepreneurs need to learn the importance of establishing checking accounts and savings accounts (i.e. Individual Development Accounts); the importance of establishing a credit rating, and in many instances, learning about credit rehabilitation. In addition many entrepreneurs need training in tax laws and regulatory issues, and sound accounting principles and types of insurance.
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4 Responses to What are the best ways for small businesses to fund themselves?
Small business loan
Bank loan
Find investors
Go to a bank(s) and apply for a small business loan(s). Your terms will depend on your credit rating and ability to pay back a loan. Your terms will also, and possibly most importantly, depend on your business plan. So, you must put together, in writing, a well thought out business plan. You must be able to present this in such a way a banker understands (i.e. how you will make a profit and pay the loan back). You will need to develop pro-forma financial statements within your plan. Basically, work the numbers backwords (depending on your business) the average sale multiplied by averages sales per day and you better be able to justify your findings with convincing research. Also outline all expenses you will occur on a REoccuring and ONE TIME basis. This info should get you started.
may look for friends and relatives for a sort of loan that it may be added in the amount needed and tell them that you’ll return the money back with in a year or two or you can tell them that you will be making them as your business associates or partners.
You need a microloan. You can get those through any microenterprise organization in your local area. You also get technical support and possibly mentorship which I suspect you will need as you did not state an exact amount for funding and you did not state whether the funding amount was for a one year period or over a three year period. A microloan can be given over and over again. The microloans are $35,000 and under. Here is the info. Good Luck!
About Microenterprise
Microenterprise Defined
AEO and its members have defined microenterprise as a business with five or fewer employees requiring $35,000* or less in start-up capital. AEO estimates that there are over 20 million U.S microenterprises, which represent 17% of all private employment in the U.S. In addition, microenterprise represents a path from poverty to financial security for many low-income individuals.
* Loans of $35,000 and under are known as microloans.
Microenterprise Development Industry
The estimated 600 microenterprise development organizations (MDOs) operating in the U.S. exist to support disadvantaged entrepreneurs as they start or expand their businesses. MDOs can increase the chance of business success by bridging the gap between disadvantaged individuals and the tools they need to start and grow successful businesses. With the help of AEO services, MDOs offer business training, technical assistance, access to capital, and other services to entrepreneurs to assist them in realizing their dream of business ownership. For many low-income entrepreneurs MDOs represent the only opportunity to access the capital and business tools necessary for business start-up.
Key Elements of Microenterprise Development
AEO has learned that comprehensive microenterprise development programming consists of four key elements: Training and Technical Assistance; Credit and Access to Credit; Access to Markets; and Economic Literacy and Asset Development.
Training and Technical Assistance
Microenterprise development practitioners agree that the quality and quantity of training and technical assistance provided to an entrepreneur can often be the biggest factor in whether the entrepreneur’s business succeeds of fails. Microenterprise trainers have the difficult task of teaching complex business skills to entrepreneurs with little formal training, limited time to engage in learning; and various levels of education.
Though training opportunities vary from organization to organization, typical microenterprise development training topics include: business plan development; integrating technology; bookkeeping and business management; and marketing. Training is offered through various settings including: classroom type lectures; one-on-one counseling; peer networking; and mentoring programs.
Credit and Access to Credit
A significant challenge for many microentrepreneurs is access to capital. Traditional lending sources do not find it profitable to lend $35,000 or less and choose not to. In addition many low-income individuals looking for a path out of poverty through self-employment, have poor (or no) credit history with no hope of receiving a bank loan.
Some microenterprise development organizations (MDOs) offer credit directly from an in-house loan fund, which typically lend amounts from $100 to $35,000 and when granting loan requests look at other factors in addition to the entrepreneur’s credit. Other MDOs partner with other organizations or institutions in the community to provide access to credit. Examples of these type of relationships include partnerships with banks, credit unions, or other financial intermediaries that offer loans and various other financial products.
Access to Markets
The goal of microenterprise development programs is not just to create marginal businesses, but to create successful ones. To help microentrepreneurs increase sales and profitability, many programs create specialized networks of their clients’ businesses, especially in industries where microenterprises are flourishing. These industries, also referred to as sectors, include: specialty foods; jewelry; arts, crafts and gifts; clothing and textiles; furniture; computer technology; daycare; and environmental products and services such as recycling.
Access to market services include: sophisticated training on marketing and sales concepts; development and distribution of joint catalogs; Internet access and e-commerce; trade shows; and business incubators.
Economic Literacy and Asset Development
AEO has learned that low-income entrepreneurs can greatly benefit from increase knowledge of the benefits of banking and saving principals. Many entrepreneurs need to learn the importance of establishing checking accounts and savings accounts (i.e. Individual Development Accounts); the importance of establishing a credit rating, and in many instances, learning about credit rehabilitation. In addition many entrepreneurs need training in tax laws and regulatory issues, and sound accounting principles and types of insurance.