Small Business Debt Funding

Do You Need Small Business Debt Funding for Your New Business?

The way you decide to raise the finance is one of the major choices you will face when you are starting a small business. Small Business Debt Funding is one of your choices.

Borrowing From Friends or Family

Family and Friends are another source of funding, whether they lend you the money, buy into the business, or work for free until you get on your feet.

As family and friends tend to believe in you they may be more willing to help, but be warned, family relationships and friendships can be severely tested or even broken if the business hits a rough patch.

If these people are also the ones providing moral and emotional support for you during the start up phase it may be more important to retain the relationships rather than to get the funding from them!

Rather than borrowing from them directly, it may be possible for your family and friends to help you source start up finance in another way. Third Party Guarantees are arrangements where the third party (your family member or friend) co-signs a loan or guarantees to meet the payments on a loan if you are unable to meet them.

Less risky to them personally, but if you do default on the loan, don't expect your family member to be too sympathetic or understanding!

Borrowing From Banks or Financial Institutions

Banks rarely provide funding for new businesses, unless you have serious collateral, have someone willing to guarantee your loan or if you have an existing (and continuing) source of income.

Your new business may build over time into a valuable asset, but when you are starting out it is not surprising that the bank is not going to give your future profit projections much weight in their decision making processes!

Other Sources of Funding

If this form of funding is too risky for you (or just not available) you might want to check out the other forms of funding, like founder funding or equity financing.

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