Factors to Consider
Consider the following factors as you gain and maintain financing for your business:
Credit and financial history. Your credit and financial history are important to potential lenders. If
you can’t show your ability to manage your personal finances, it will be difficult to secure financing
from third parties.
Experience and expertise. Lenders also look at the management experience and education you have
that can be directly applied to the business you are opening. If you have management experience or
hire key managers, lenders will look at their experience as well. Strengthen your position by taking
small business management courses and ensuring that your managers are equally trained.
Ability to repay the loan. Consider how well you can pay back what you borrow. The interest rate
you receive will be directly related to your ability to repay the loan. If you are a higher risk, meaning
your credit history or personal finances are not stable, you could pay a higher interest rate.
Trigger points. Develop trigger points in your business plan that will alert you to certain situations
that could be signs of trouble. If you put these alerts in place early enough, you may be able to turn
your business around before having to close your doors.
Diversification of customers. Make sure you are not depending on only one or a few customers for
all your profits. What happens if these few customer no longer use your product or service? You
need to have a diverse array of customers to be successful.
Insurance. Protect yourself from catastrophic situations. In case you are no longer able to work
because of injury or even death, you should make sure you have enough disability and life insurance
to pay off your debts to protect yourself and your family.
Incorporation. If you don’t incorporate your business when you first open, consider doing this at
some point. Talk to your accountant and seek legal advice when you are ready to incorporate.
Contingency Plans. Should your business not get to a profitable state and closure is inevitable, talk
to your investors and lenders. It may be possible for you to continue making loan payments by
selling your business assets. Your investors and lenders may be able to help you develop plans to
pay your debts.
FDIC OMWI Education Module:
Fueling Your Business - A Guide to Financing Your Small Business Page 10 of 10
Fueling Your Business: A Guide to Financing Your Small Business
Key Takeaways from This Module
A range of possible financing options exists; be aware of the differences so that you can make
educated decisions for your growing business or to grow your business.
Determine your expenses and costs before seeking funding so that you know exactly how much
you need to finance.
Options for financing range from bank loans to angel investors, but each has costs and benefits
that you should consider.
Understand debt and equity financing to better prepare yourself for the requirements of
different types of funding.
Consider other factors (such as insurance and contingency plans) that are important when
obtaining and maintaining adequate financing for your business.
Sources and Citations
Small Business Administration, Understanding the Basics
Shirleen Payne, ProSidian Consulting, LLC, Fueling Your Business - A Guide to Financing Your
Small Business
Articles Base, Small Business Financing Success with Realistic Choices
Go 4 Funding. Small Business Funding
USA Today, Funding Sources for Small Business
About.com, Peer to Peer Lending – A Source of Small Business Financing
The Houston Chronicle. Sources of Finance for Small Business Startups
Q and As, What is an Unsecured Small Business Loan?
Grants.gov, Who Is Eligible for a Grant?
Merchant Services, Small Business Grant Availability
Wikipedia, Crowdfunding
Bloomberg BusinessWeek, Clues to How the SEC is Thinking About Crowdfunding
Jennifer Blythe Whitley, ProSidian Consulting, LLC, Fueling Your Business - A Guide to Financing
Your Small Business