Obtaining Small Business Capital

There comes a point in every entrepreneurs operation when they need to obtain small business capital. There are only a handful of businesses on the planet that have been able to launch and expand their operations solely with the ongoing profits of their business. Typically, businesses that have been able to do this generate extremely high gross margins and have very few operating costs. However, this is not the case for most small business. Most businesses need to receive capital just to launch their operations.

The first step to obtaining business capital is to develop a business plan that outlines your intended business or your currently operations. Almost all investors and lenders are going to want to see a formal business plan in place before they consider your business for either a debt or equity capital investment. Your business plan should have an executive summary, a break down of how you intend to use the funds that you are seeking, an overview of the products and services that you sell, a complete examination of the economy, an overview of your specific industry, a demographic analysis, a competitive analysis, an overview of your marketing strategy, and a full scale financial plan. As it relates to your financial plan, you are going to need to have a profit and loss statement, cash flow analysis, business ratios page, balance sheet, and capital amortization schedule. As always, if you do not know how to properly develop these financial models then we recommend that you work with a CPA, financial adviser, or business planning consultant. There are also a number of programs that can be purchased on the internet that can assist you in developing these financial statements on your own. However, even if you do develop your own business plan and financial models you should have your certified public accountant review your work once you are done. This will ensure that your financial projections are reasonable and accurate as it relates to your market research.

Once your business plan is complete, it is time to determine which type of capital you will need for your business. Most commonly, people seek business loans in order to launch their operations. However, given the difficult economy over the past four years, many financial institutions have pulled back on their small business lending activities. As such, you may need to enlist the capital from a private investor or angel investor. While more expensive than a bank loan, selling a portion of your business to a third party investor can be less risky than undertaking a large debt obligation.