Dollar Bank - Business Center - Financing

Financing Your Own Business

How much money will I need to start my own business?

Your business plan is vital in determining how much money or capital is needed in starting a business. You will need to determine your operating expenses (rent, utilities, maintenance, salaries, taxes, etc.), the cost of supplies and materials and the amount to repay borrowed money. Generally, it is advisable to consult with an accountant who can estimate your net income.

What funding alternatives should I consider for financing a business?

When it comes to financing a new business, there are several options that an individual should consider. A primary funding source may include borrowing a loan from banks, venture capital firms, local development companies or government agencies. If borrowing is not an option, then perhaps, leasing equipment or vehicles may be an alternative. For most business owners, leasing can be beneficial because it does not tie up your cash flow.

Additionally, starting a business may require using your own personal funds or savings to help finance your business venture. By committing your personal finances, this shows confidence in risking your own money and how serious you are about owning a business.

Other financing options may include asking family, friends or business associates for support or perhaps, you may want to consider a business partner. When considering a business partner, keep in mind that you will need to work together consistently. Therefore, the success of your business relationship will depend on factors such as personality, character, business ethics and management style. Nevertheless, enlisting a business partner does not guarantee all your funds, but it can assist you in raising additional capital for your business.

What will I need to do when applying for a loan?

A strong business plan, financial statements and tax records will play a key factor in applying for a loan. Being prepared with these items can expedite the loan process as well as make it easier and less frustrating for you. Also, be prepared to answer questions like: "Why are you applying for the loan?", "How will you use the loan?", "How much would you like to borrow?", "How do you plan to repay the loan?" Furthermore, you may be asked to provide an outline of your experience and management capabilities as well as the expertise of your staff.

According to the Independent Community Bankers of America (ICBA), an advocate for the nation's smaller banks, financial institutions follow the six C's principle before issuing a loan:

1. Character of the business owner
2. Credit history
3. Capital
4. Cash flow
5. Collateral
6. Capacity to repay the loan

Should I consider leasing equipment, supplies or other items for my business?

Leasing can be an easy alternative to borrowing funds for the purchase of equipment, supplies or other items for your business. As with any business decision, you will need to weigh your options and calculate the costs associated with making a one-time purchase. With leasing, you are able to finance the entire cost of your purchase without tying up your cash.