"Money is always there, but the pockets change." — Gertrude Stein

The perception that many small business owners have is that financing means taking whatever money you can get; the faster and easier you can get it, the better. Unfortunately, this approach doesn't take into account the fact that getting money for your business involves a variety of considerations, financial and nonfinancial, good and bad.

Finding "smart" money. Small businesses usually need more than just cash: they need "smart" money. By smart money we mean financing that helps your business in the way that you want it to, where the financier provides not only capital, but support and expertise to your business. Smart money could be an SBA guaranteed loan that allows you to keep your ownership interests intact until your business reaches the stage at which you want to sell shares of the business. On the other hand, money that comes from letting your brother, Stanley, become a partner in your business because you need his $10,000 before the end of the week might be far more costly than you ever imagined.

The problem in locating "smart" money is that the capital market for small businesses is imperfect and consists of a great variety of underpublicized and poorly organized financing sources. Whether you are trying to locate a bank that is willing to lend money to your small business or whether you are looking for a business "angel" who will contribute needed equity capital, your quest for financing will require that you devote the same attention to obtaining capital as you give to decisions involving the business's basic product or service.

The discussion in this module is designed to help you identify relevant traits about your business's financing profile and understand the various financing sources that may be available to you, with an emphasis on practical information on selecting the most suitable sources of funding for your business.

• Your business's financing profile explains how your position in the business life cycle influences your financing options, how you can estimate the amount of money you need, and how you can find money in your own back yard by tapping friends, family, and personal assets. We also provide a "quick pick" chart showing your best financing options.
• Debt vs. equity shows how the two basic forms of financing differ, and how you can combine them to your best advantage.
• Equity financing explains how your form of business organization can be used to bankroll your business, and the advantages and disadvantages of using venture capital, "angels," sales of securities, franchising, and employee stock ownership plans.
• Debt financing discusses where and how to get a business loan, and the types of loans available.
• Government programs shows how the federal Small Business Association can help to finance your small business, and describes other government financing assistance.