Financing a new small business is one of the biggest hurdles that an aspiring entrepreneur faces. But it’s not an insurmountable one. There are sources of start-up funds that are not as difficult to secure as many people assume. The key is to find the right type of financing for your specific needs, determine exactly how much you need and what your responsibilities are to the lenders, and know how to use those funds wisely. A wrong move in any one of these areas could make the difference between success and failure for your small business.

“Some of the possible sources,” according to L-A SCORE counselor Peter Sassano, “are either debt or equity financing from institutional or informal sources. Debt financing is a loan you pay back. Common sources include family and friends, personal credit cards, home equity lines of credit, commercial bank loans and bank loans backed by the U.S. Small Business Administration (SBA).”

Alternative financing

Some small businesses also receive a type of funding from suppliers and vendors in the form of special payment terms, discounts or even direct loans. Suppliers want you to succeed because it means more business for them, so they are sometimes willing to help.

Sassano adds that “with equity financing, you offer investors shares of your business in return for cash. Unlike loans, you are not required to pay the money back, but these investors now own part of your business and will want a return on their investment. Venture capitalists work this way, and stock offerings are a type of equity financing.”

Other funding or cost-sharing options include partnerships, joint ventures, alliances, co-branding arrangements and business incubators. Incubators rarely offer cash, but they provide crucial support in the form of free or reduced rent and business services.


The SBA offers several financial assistance services for small businesses, including the popular 7(a) loan program. Most U.S. banks participate in the program, which provides loans on a guaranty basis, i.e. lenders structure their own loans based on the SBA’s requirements. Details about all SBA loan programs and other useful information for structuring a financing strategy may be found at

To learn more about starting or improving your small business, contact SCORE, a nonprofit association of more than 10,500 volunteer business counselors who provide free confidential counseling and training workshops. Call L-A SCORE at 782-3708 for additional information and an appointment.

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