Financing Your Small Business

Name: Financing Your Small Business
Author: William Smith

Discover how to finance a small business

Preview the first lesson free — get full access to all 3 lessons.

Course: On-Demand

How can you finance your small business? Let's address the overall concept of researching and acquiring financing. We'll talk about what constitutes sufficient capital, how to estimate startup costs and the various options for financing. Capital is the lifeblood of any business and small business owners can benefit from knowing how to acquire sufficient funds to finance both their startup operations and growth periods. Part of the process of identifying how much working capital to use is knowing how to allocate sufficient resources to growth, profitability, and liquidity, sufficient capital gives a business the necessary resources to meet normal business obligations and be able to satisfy the creditor's demands. To meet the requirements of sufficient capital, a business is recommended to have accurate accounting of the cashflow, including both inflows and outflows. Inflow refers to the money coming into the business. This can consist of things such as customer payment receipts, bank interests, the sale of fixed assets and refunds from suppliers. Outflows are cash amounts that are leaving the business and typically consist of operating activities, investing activities and financing activities. Insufficient capital is often called undercapitalization because it refers to the lack of ability to fully pay for the company's immediate needs or future goals. Undercapitalization is common in both new and old small businesses. Generally due to the owner's lack of experience in projecting the amount of money it takes to start or run a business. Often, small business startups don't want to borrow large amounts of capital because they're afraid of being turned down for the loan. When the business doesn't request enough capital to fully open or sustain its operations, it can go back to the lenders and try to borrow more capital. If the business is unable to get another loan or liquidate some of its assets, it might be forced into bankruptcy. Another reason for insufficient capital is the cost of the loan. The loan may have terms that the business doesn't want to pay, such as higher interest rates. These rates may require the business to borrow less money, which may put unrealistic demands on the business's survival. For example, having fewer funds may limit the business to purchasing a smaller amount of inventory, which would be less than they should have according to the business's plans, sales projections. The lower amount of inventory could result in missed opportunities, loss of sales, loss of customer base and even a loss of reputation. Insufficient capital can doom a business before the business has even started.

Beginner Provider : William Smith 3 Lessons · 8m in Arabic, German, English, Spanish, French, Portuguese, Chinese

Course Description

These lessons discuss how to research and secure financing for your small business. The importance of having financing options in place for the expansion of your business can’t be overstated, because a key problem in a business’s take-off phase is not having the resources to handle the rapid explosion of demand for your product or service. By the end of these lessons, you’ll know how to finance your own business.

What You'll Learn

Distinguish between sufficient and insufficient capital for your business
Estimate your start-up and operating costs
Identify the available options for financing a business
Research and secure financing for your small business
Put financing options in place to support business expansion

Key Takeaways

A key problem in a business's take-off phase is not having the resources to handle the rapid explosion of demand for a product or service.
Having financing options in place is important for the expansion of a business.
Distinguishing between sufficient and insufficient capital is a core skill for financing a small business.
By the end of these lessons, you will know how to finance your own business.

Frequently Asked Questions

What will I learn in this course?

You will learn how to research and secure financing for your small business, including how to distinguish between sufficient and insufficient capital and how to identify the available options for financing a business.

What topics does this course cover?

The course covers Sufficient vs. Insufficient Capital, Estimating Start-Up/Operating Costs, and Financing Options.

Why is securing financing important for a small business?

Having financing options in place is important for business expansion, because a key problem in a business's take-off phase is not having the resources to handle the rapid explosion of demand for a product or service.

What will I be able to do by the end of the course?

By the end of these lessons, you will know how to finance your own business.