Financing your business

The success of a new small business largely depends on the creditworthiness of its owner. Whether the office needs more equipment or the employees need more training, it's the owner's responsibility to foot the bill.

Some owners turn to investors for the capital, but many others will secure a loan or a line of credit from a bank. Others simply use their own personal credit cards or a combination of these types of credit. Savvy small business owners will try to find lower interest rates on small business loans rather than the increased cost of using a personal credit card.

Unlike the unsecured credit cards, small business loans generally need to be secured by assets, namely property or goods. You'll also need to calculate the actual cost of the loan, and decide if you're comfortable living with some of the imposed restrictions (such as caps on your salary).

To secure a loan, you will probably need to submit a precise business plan, tax returns, balance sheets, income statements and credit history - as well as additional documentation - to the loan officials. Considering the fact that about 80 percent of new businesses collapse within three years, it's easy to see why lenders are reluctant to finance new businesses. If securing a bank loan is indeed not a possibility for you and your business, you can always turn to the plastic to finance your entrepreneurial dreams. But always keep sight of the risks.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.