Financing Your Entrepreneurial Dream– Part 3 of 7: Exploring Financing Options

Written By Jon Handy, May 16, 2012

Financing Your Entrepreneurial DreamSmall business financing
Practical Ideas, Practical Discussion – Part 3 of 7: Exploring Financing Options

You’ve done your homework and know how much money you need to get your small business up and running. Like many entrepreneurs, you probably need to explore financing options. Here are some key things to consider:

  • Are your needs short term or long term? Determine how quickly can you pay the loan back or provide a return on an investment.
  • Is the money for operating expenses or for capital expenditures that will become assets (for example, equipment or real estate)?
  • Do you need all of the money now or smaller pieces over several months?
  • Are you willing to assume all of the risk if your company doesn’t succeed, or do you want someone to share the risk?

Once you’ve answered those questions, you’ll need to decide which type of business financing best fits your needs:

  • Debt financing: You borrow money and agree to pay it back over time with interest.
  • Equity financing: You sell partial ownership of your company in exchange for cash.

Taking the time to thoroughly research which type of financing is right for you is extremely important. Your business depends on it! In your opinion, what are the top pros and cons of debt versus equity financing? Please post your responses in the comments. Have questions on what’s right for you? Post those in the comments, too, or contact our team of small business experts.

If you missed last week, check out Part 2 of 7: How  Much Money Do I Need? and don’t forget to tune in next Wednesday for Part 4 of 7: The Money Hunt: Where Can I Get Funding?