Introduction

• Ask any business owner, large or small, and they will tell you that business finance and the ability to secure operating credit is the lifeblood of the American company. While it is technically true that a business could operate on cash or even bartering, many could never reach the scale of sales and revenue available today without financing opening the door to make large-scale production or services possible.
  
  However, recent times have grown much tougher with the problems of Wall Street and the related market meltdown having ripple effects into Main Street. This financial contraction has pinched the ability to find traditional financing in banks and lenders everywhere. The conservativeness shouldn't be a surprise; with millions in defaults due to bad mortgage loans, lenders have to become prudent again to avoid further losses. So what is a business to do to find viable financing then?
  
  

Borrow From Yourself

• In difficult times, companies trying to generate business financing have to look at all their options, and that includes the owner's own assets. Entrepreneurs fortunate enough to have significant personal assets have an additional cushion to use as short-term financing. Most financial advisers will insist that savings, retirement accounts and personal credit cards should never be used to float the company's books, but if that same company provides a livelihood for the owner, it would make sense to keep the operations going during tough times until things look up.
  
  The self-financing option is particularly present in new businesses. Because investment financing usually no longer appears just from an idea (a hard lesson learned from the follies of the dot-com boom in the 1990s), many new businesses have to prove themselves first. They run bootstrap operations, paying for the very basic essentials to get the job done and earn enough for the next project. This time period, aptly named the "trough of sorrows" by some business experts, usually is a dry period in terms of cash flow. That in turn requires on average as much as 30 percent of new entrepreneurs' personal funding to keep the lights on.
  
  But borrow smart from yourself if you must. Choose basic savings, stocks and mutual funds, and other liquid items before cutting into your retirement accounts, especially if withdrawal would result in unnecessary tax penalties.
  
  

Borrow From Family and Friends

• As uncomfortable as the idea may be when first cooked up, many small businesses have secured their first initial financing from family and/or friends.
  
  Frequently, close friends have joined businesses as the initial partners, putting in significant investments to make the crazy idea become a profitable reality. And many times, this type of financing tends to be interest free in exchange for a stake in the project or some other participation. Again, it can be a bit uncomfortable asking for help, but you're in essence doing the same thing with strangers when applying for a business loan from a lender.
  
  However, be careful in making too many commitments against your business's future. Entrepreneurs often try to offer a share in potential future profits for financing today. This equity approach in the business can come back to haunt you later by interfering with your ability to choose the company's direction. In short, the trade-off compromises your ownership. Stick with a simple loan format with family or friends, even if you have to pay a nominal interest rate. It will likely still be far cheaper than a commercial lender, and many times family will forgive loans on a bad turn.
  
  

The Standard Bank Loan

• The most common business financing is in the form of a small business loan from a bank. Unlike a consumer loan, your business pretty much has to open up all of its books to the lender, both fiscal and operational. Banks and lenders want to know what all the risks are before stepping into a business loan agreement. Many times, these commercial loans are callable as well, which means they can be cut off quickly unlike a scheduled consumer loan. This is because many banks extend financing in the form of lines of credit rather than loans. While lines of credit offer flexibility to borrow what you need when you need it, similar to a credit card, they also end abruptly if a bank needs to shut down overall risk. Many small businesses have suddenly been put up on the rocks by their bank shutting off their credit line when they needed it the most before that next big materials order for production. Have a contingency plan for alternate cash flow solutions if you go this route for business financing.
  
  

Private Investors

• Angel investors, venture capitalists, private partners, silent partners -- the names go on. They all represent a source of financing that is off the traditional grid, yet significantly vital to the success of small businesses. Private investment in many cases today is what launches a small-time creative pod into a megalith success. It provides serious financial backing to grow exponentially and put in place the professional structures needed to operate at a corporate, national and even international level as a business. But it comes with a serious price.
  
  Most private investors want a serious share of the potential business opportunity. Even before the unbelievable success of Google came along, private investors usually charged a controlling share of ownership for access to their money. The eye on the prize has only become even more of an issue with the success of various Internet ventures. And it is not uncommon for private investors to demand that entrepreneurs work for little salary, investing all the profits in the business. Then, at success, the entrepreneur is pushed out completely to sell the business for a significant return. The private investor then repeats the profitable cycle with someone else's new concept. It's a nasty business ready to take advantage of good ideas and naïve would-be business owners. So be careful with making a deal with the devil.
  
  

Mapping Your Time and Other Factors

• Finding financing is a personally grinding business. It takes time, energy, pursuit, creativity, loads of energy and for some, one heck of a lot of coffee.
  
  So do your business financing search shrewdly. Many will advise spreading yourself wide like a fisherman with a net. But business financing sources don't act like fish. They're not sitting around waiting for you to catch them. Instead, you have to sell your business as a viable option to support with their financing, and you have to make it clear how a lender will make a profit working with you.
  
  Make it easier on yourself by networking. As the old saying goes, you have 15 seconds to sell anything, and it's a lot easier to make that connection via someone you know rather than a complete unknown. Putting your energy into a few good connections will produce faster and stronger financing results than just cold-calling anyone. And, to have a chance with any private investment, you need a sponsor or inside party vouching to the lender that you're worth considering. That only comes through connections, not your phone calls.
  
  That said, plenty of outfits and ventures are willing to suck up your time and money with promises that they can "connect" you to financing. Your business needs to be conservative and suspicious. Map your time and money spent if you go the route of utilizing these middleman brokers. If you're not seeing a measurable return, then it's time to consider dropping one broker for another or going after a connection on your own. Sticking to a financing broker out of blind loyalty will only empty your wallet.
  
  While chasing business financing, don't forget that you will need help from more than just cold, hard cash. To set up your financing options in the best light possible for your business, you will want some expertise to avoid problems later.
  
  First off, find yourself a reliable lawyer. It will cost money; most attorneys on business matters charge upfront or require a retainer (a monthly salary fee for a set amount of regular services or time). However, the cost is well spent. Most financing deals involve a significant amount of legal terminology and contracts, much of which can be confusing and dangerous. Remember the aforementioned section on potential ownership losses? It usually happens with legalese buried within investment contracts.
  
  Next, utilize the experience of other business owners who've gained some experience already running their own companies. Getting an idea of the mistakes they made with their own financing ventures can save you a lot of worry, money and time. Also, experienced business owners can guide you as to which financing is better for your situation and when to use one method over the other. Talk to a few of them, and you can take advantage of 10 to 20 years of business experience in the space of a few, often-free conversations. If you're real lucky, they may even connect you with a good lender or investor and vouch for your idea as a potential interest.
  
  

Then There's the Government

• Both state and federal governments are keen on supporting the growth of business in their specific regions, even if their tax policies may seem to imply otherwise. The most common form of government financing assistance is federal small business loans. The federal government is represented by the Small Business Administration, which has three main programs available for business fiscal support (see weblink below in References).
  
  The first is the Basic 7a Loan Guarantee. This option is the SBA's main offering for small business financing. It is aimed at businesses that may not be able to get financing from traditional lenders. The loan covers a wide array of possibilities and provides financing for operations, capital outlay, assets and working finance. The SBA delivers this funding through commercial lenders selected to handle, review and process SBA loans.
  
  The second category is the Certified Development Company (CDC), a 504 loan program. This financing option is focused on establishing a traditional type of loan with a set time period and fixed rate, similar to a long-term scheduled loan consumers may use for homes or cars. This approach is suitable for those seeking a traditional loan setup without any customized approaches. It's most often used to support businesses in redevelopment zones that government has targeted for improvement.
  
  Finally, the third alternative includes the Microloan, a 7m loan program that supports financing up to $35,000 for both small business and specific nonprofits. The financing covers equipment, materials for production, and capital assets. In this category, the SBA transfers the financing through a third party geared for identifying microloan candidates for specific purposes. These parties also combine the financing with their own technical help and assistance in starting very small businesses. Again, microloans tend to be targeted to locations and areas for specific improvement.
  
  Each state also runs a program for business support. These programs may be at the state or county level. They are usually coordinated through the business-oriented departments or the given secretary of state's office. You want to make contact with these areas to find viable grants and loan programs that may fit your purpose. Government agencies established to promote business want success stories; your viable business represents a justification for that agency's existence and ongoing expansion. So take advantage of government's need and turn it into your assistance. Not sure where to look? Try your local legislator's office. The staff can quickly find you the appropriate department and phone number to connect you further. Also try the Internet. Most government agencies have a fully-developed web page with all their program information and applications.
  
  

Conclusion

• The above sections have covered generally some of the most common and immediately available forms of business financing. There's no right approach for everyone. In fact, in many cases, a combination of options cobbled together many times is the right solution. Each business at a point and time will have to choose what works best for immediate and/or long-term needs. Whichever the case, financing is what keeps businesses going, especially during rough times. And owners need to use their creativity and networks to keep that lifeblood flowing, especially when traditional lending may dry up due to market conditions.