Financing a new small business is one of the biggest hurdles that an aspiring entrepreneur faces. But it is not an insurmountable one.

There are sources of startup 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).”

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 repay the money, 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 is quite aggressive now in offering several financial assistance services for small businesses as part of the Recovery Act. Most U.S. banks participate in the popular 7(a) program that provides loans on a guarantee basis, i.e. lenders structure their own loans based on the SBA’s requirements, and applicants’ credit scores are very important. Details about all SBA loan programs and other useful information for building a financing strategy may be found at www.sba.gov/services/financialassistance.