Small Business Finance
For the small entrepreneur, it is impossible to overstate the importance of small business finance. Although the survival statistics for new businesses vary somewhat, the result is daunting: Between 50 and 90 percent of all of new businesses fail within the first two years of operation. There are a variety of explanations for this, but inadequate provision for small business finance requirements, or small business loans is a significant contributing factor.
The largest obstacle you will probably face as a small entrepreneur is obtaining the necessary small business finance to get your business off the ground. The initial funds will need to cover the expenses associated with business registration, inventory, marketing, and your business premises. Subsequent to this, funds will be needed for your day-to-day operating expenses, such as wages, utilities and so forth. When preparing your small business finance plans, do bear in mind that most businesses only become profitable after their first year of operation. Additional investment may become necessary during the second year to fund growth. Include the cost of growth when you do your planning.
Your chances for obtaining small business finance will be greatly enhanced if you approach investors with well substantiated financial projections. These will include your expected costs, your estimated revenues and your business' growth potential. It is a good idea to corroborate your expected growth projections with well researched market related information.
Small business finance is a two-sided coin: Although sorely needed, you should not accept financing from just anybody. Check them out! When evaluating potential sources for small business finance, look out for the following:
- Costs (interest rates, administration fees etc.)
- Flexibility
- Restrictions (usage, obtaining other financing etc)
- Risks