They are small business loan and business credit card. I will also explain how each of these works and the risk involving each one. In my Lake Shore Used Book Store all my funding has come from a rich relative. I have come to the point I am ready to go out on my own and get my own funding. First I would like to do is get a small business grant. A small business grant is free money from the government to start any type of small business. To qualify for this kind of funding I have to be a United States citizen. Small business grants do not require credit checks, collateral, security deposit, or co-signers. You can also qualify even if you have had a bankruptcy or bad credit. This type of funding really does not have any risk involved. The money does not have to be paid back. The only problem with a government grant for small business is that the funds may be limited. So you have to apply before the funds are gone. I will also get a government bond. A bond is a debt security, similar to an I.O.U. It is the most secure, because the government backs them. So there is very little risk in government bonds. The issuer promises to pay a specific rate of interest during the life of the bond until they repay the face value of the bond when it comes due. So you are making money on the interest you can put into your business. Since, you will be receiving interest income. You don’t really need to do anything to qualify just have the money to be able to afford to lend the money to the government in the form of a bond. The only disadvantage to a government bond is you will not have access to the money you lent out. I can also go to my local bank and get a line of credit. A line of credit is a fixed amount of money that my used book store can draw against. You have to apply for a line of credit just like you apply for a loan. You only have to pay interest on the amount you use not for the amount available to you. And only have to make payments when you are using it. The line of credit is useful because it is usually for an unlimited amount of time unlike if you had a loan. To qualify you must meet all the credit requirements that you would have when applying for a loan. These are three forms of funding that I can use to help finance my Used Book Store. With the government grant and government bond there would not be any risk over financing through my relatives. Because, with the grant it is free money I do not have to pay it back. With the government bond I will be making money. The risk of using a line of credit is that it will likely cost more due to the interest I will have to pay. And if I do not have the money to make a payment the bank will not be as understanding as my relatives might be. In the future I will be financing my business in two different forms of financing. I will get a small business loan (personal loan). And will also get a business credit card. I plan on financing my business mostly on the profits I will be making when I become more financially secure.
There are a couple of forms of financing I can use to run my used book store. First I would use a small business loan. A small business loan is an amount of money borrowed by a small business person to start or run a small business. With this kind of loan I will have to show a business plan showing what I will do with the money when I receive it. Plus I will have to show my cash flow projections. They will need a statement of my personal financial status to give the lender a full picture of my financial issues and my credit report (Ward 2008). The risk with this type of loan is that if I can not make the payment I could lose the business because the bank may foreclose on my store.The other option of financing my used book store is a business credit card. A business credit card is an amount of money which a business can borrow against at times in need of capital. A business credit card is usually issued to a corporate executive or business owner in order to more easily keep business expenses separate from personal charges (Google 2008). With the credit card you are charging you purchases on an account. You make a monthly payment on the account. The benefits to a business credit card are that you can keep your business and personal transactions separate from each other. You can also itemize expenses at the end of each year to track where all your money is going. It will also help you build your credit incase you need future financing. The risk in using credit cards is it can ruin your credit if you do not keep up the payments. They can cost you more with high interest rates than other forms of financing. If you are not careful and get in over your head with credit card debt it can ruin your business and dreams.
Reference Google (2008) Definitions of business credit card retrieved on 4/17/2008 from www.google.comSmall Business Grants (2008) Small Business Grants retrieved on 4/16/2008 fromwww.government-grants-for-business.com Small Business Notes (2008) Definition of Line of Credit retrieved on 4/16/2008 from www.smallbusinessnotes.comThe Securities Industry and Financial Markets Association (2005) Bond Basics retrieved on 4/17/2008 from www.investinginbonds.comWard, Susan (2007) Finding Small Business Financing retrieved on 4/17/2008 from www.sbinfocanada.about.com/cs/financing/a/bizfinancing.htmWard, Susan (2007) How to Get a Small Business Loan retrieved on 4/17/2008 fromwww.sbinfocanada.about.com/cs/financing/a/getbusinessloan.htm?p=1Ward, Susan (2007) Small Business Loan retrieved on 4/17/2008 fromwww.sbinfocanada.about.com/cs/financing/g/smallbizloan.htm?p=1Zahorsky, Darrell (2007) 6 Steps of Effective Small Business Credit Card Management retrieved on 4/17/2008 fromwww.sbinformation.about.com/od/creditloans/a/creditcard.htm?p=1
