How to Finance a Small Business

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Financing a business whether small or big may be not that easy. You need to learn more about the business before risking your finances.

There are two types of finance, one is all about saving money and the other one is all about lending money.

Usually finance works in business organizations. The financer will lend the business organization money for start up capitals, investment or consumption and the interest will then be charged on the loans itself. Small business is usually the ones who need financing for capitals.

Financing a small business might be really risky. But there is no harm in trying, who knows, that small business might grow in to a big and popular business someday. Of course, you don't just lend your money to anyone that comes across you. You need to know everything about their business first before lending them the capital that they need.

Here are some helpful tips on how you can finance a small business:

Ask for a business plan from the borrower. This will include outlines of his ideas such as, how he is planning to develop the business and how the money will flow. Make sure that the business plan is somewhat realistic and the person is really eager to achieve everything that the business plan states.
Ask for a business model that is very convincing. In this business model you should be able to see the detailed financials that shows your business aspects. It should also include the product manufacturing, sourcing costs, project sales and as well as the expenses in the market
You should know how much money you can lend the borrower by reviewing the business plan and model. You can lend him some funds for start ups and sufficient amount of capital to keep his business running. Start up funds include, office supplies, furniture, equipments, phone lines and printing of business cards. Ask for a specific list of all the expenses and check if it will suit to funds that you are going to lend him.
Ask for your friends’ help, especially from those people who have experiences in financing business.
Ask your attorney to set up a legal document about financing the borrower’s small business, and how he will pay you back the money. You should also include the interests, due dates and penalties if ever there will be some delay during the date of the payment.
You should check the borrower's capability to finance his business up to the extent. In this way you can also see how determine he is in pursuing the business itself.
You should also ask for collateral. Collateral will always depend on the size of the loan that the borrower is asking. Collaterals act as your security just in case everything didn't go well as expected.

When it comes to financing a small or big business, investigating and studying the business plan and model of the borrower is always important. In this way you will know the capability of the borrower to pay you the amount and the interest of money that he borrowed from you.

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13 Comments

Ocaya Andrew said on September 29, 2010
i am a public servant, at moment i am working with police department. My interest is to learn how to run a small scale farming and piggery. Need your help me how to run this business. Thank you
Ocaya Andrew said on September 29, 2010
Can you know any organization which can help me inform of knowledge and material or financial aid.
Rao Puran Pal said on October 3, 2010
we am looking for a financing agency or investor to finance our project to develop 10000 acres land in state of Maharastra near Nasik. Interested personnel please contact on loving.god123@gmail.com and/ or mobile # 00972 54 65 38 341. Best regards. Rao Puran Pal
k.m.katariya said on March 4, 2013
i want to start a new small business in vadodara gujarat please guide for bank finance.
k.m.katariya said on March 4, 2013
i want to start a poultry farm & greenhouse flower farm please give me detail on kanubhaikatariya@gmail.com or mobile 9998965730 regard
Rajesh B said on August 16, 2013
Sir, My name is Rajesh. I am a Graduate and presently not employed. I need financial assistance to start Electronics spare parts shop in my Village, Perunad, Kerala. I need minimum Rs. 300000 Lakhs for setting up this business. Kindly advice how can I get proper assistance. Requesting your reply. Rajesh, Perunad, Pathanamthitta Dist, Kerala, INDIA - 09995634104, travancore@sifymail.com
Syed fairoz said on November 4, 2013
Dear respected sir madam i am from bangalore i have request that i want financial support for small business and my name fairoz i want maximum 10 lakhs so i am physical handicap so kindly call me my no 9060595719 9738772831 and pls help me Sir
bhavesh patel said on November 15, 2013
i can started fast food agency in amreli gujrat like as mcdowals, chatkaz, any type this please subject how to take franchise of this mo.no.8401100003
sharwan bhati said on January 31, 2014
Sir, i am sharwan bhati from palwal, haryana. Sir i want start a mustard oil mil in palwal, haryana. So, i want some loan for this business, sir, please reply me on this contact no.- 9468110169. Thank you sir,
Michael Fonseca said on February 19, 2014
I want to set up a Coconut Farm in Khed District in Maharashtra, for this I need Finance. My background is Ship Captain by Profession, have done Construction, Garment Manufacturing and Real estate Consultancy/brokerage business. Coming back into business after some setbacks in life. Hardwork and learning from the failures of my past is my experiences and will now prove helpful. Michael 09323812644(mob)
K.PACHAMAL said on October 17, 2014
Dear, sir i am starting small business in ramnadu district .please help me sir.please reply sir
vishal boese said on October 8, 2015
Sir i am vishal borse i am grajuate in Electronics engg. I want to start electronics and electrical spares part business but i am confuse how i can start basically i am from rural area so plz. give me your suggestion +919579703802
Paresh Patel said on October 16, 2015
Hello, This is Paresh From Gujarat and my proposal of around INR 3 Crores to start up my Business in related to Food Industries. My Project is to manufacture Biscuit line and to commence it, I need huge investment for land & Building, Plant & Machinery, Working Capital...Plz guide me from where can i get this financial support and reply me on my mail : paresh2381982@gmail.com

How to Finance a Small Business

Here are some helpful tips on how you can finance a small business:

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