Debt financing refers to what we normally think of as a loan. A creditor
agrees to lend money to a debtor in exchange for repayment, with accumulated
interest, at some future date. The creditor does not obtain any ownership claim
in the debtor's business. Debt financing is attractive because you do not have
to sacrifice any ownership interests in your business, interest on the loan is
deductible, and the financing cost is a relatively fixed expense.
In this discussion, we're going to look at debt financing, including:
- Selecting a bank or
conventional lender: what are your options and where are you most likely
to obtain the best loan for your business?
types of bank loans: what kinds of loans are available, and what are the
practical considerations for small business owners?
and indirect costs: what are the expenses and demands of a bank loan?
banks look for: credit history, collateral, cash flow, and character as
they relate to different kinds of small business loans, and the documents
you'll need to get a conventional loan.
financing: how accounts receivable and inventory can be used as
renting can be an alternative way to finance equipment purchases.
credit: suppliers can often provide an easily available way to
supplement conventional borrowing.
insurance companies: your existing policy can be a source for
low-interest policy loans.