Every business needs sufficient assets to be able to perform the everyday tasks to keep the doors open. Common business necessities such as the overhead of the building, employee salaries and the purchase of supplies are examples of items that must be paid consistently. No matter how well funded a business was at the onset, these are 3 financial resources every small business owner needs:
Main activity of the business
Whether it’s the sale of goods or the performance of a service, the main business activity will be the primary financial resource. Ultimately, a successful business will rely on this almost exclusively. But that may not be true when the business is in its early stages, when expansion is deemed appropriate or when unexpected events arise.
Capital funding
If the business has been so structured, the issuance of stock has traditionally been employed to raise money for growth and expansion. Another option is a contribution of capital, whereby an owner or a partner, or someone wishing to become one, may give money or property to the business, not with the expectation of being paid back but to increase or create an equity interest in the company.
External sources
There are numerous sources of money available. Almost all will weigh to some degree: personal and business credit scores, length of time in business, annual business revenue and the loan amount. The most common money sources are:
- Local bank – Establishing a good relationship with a bank can help make business loans, business lines of credit and business credit cards easier to obtain.
- Small Business Administration – The SBA may be a good source for loans guaranteed by the SBA, contacts with investors with capital to invest in exchange for both debt and equity, and grants for businesses that do certain types of research and development.
- Alternate sources – Other options include friends and family, venture capitalists, angel investors, crowdfunding and peer-to-peer loans.
Money is vital to the ongoing existence of any small business, and planning for the best and most appropriate use of is critical. Additionally, many small business owners overlook or fail to distinguish the difference between the assets of the business and personal assets. Spinnaker Investment Group has a proven track record of working with small business owners to maximize their economic potential. If you know a small business owner who could benefit from an economic review, please access our referral program.
Disclosure
The information contained herein is based on internal research derived from various sources and does not purport to be statements of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to the accuracy or completeness, has been obtained from sources we believe to be reliable. Opinions expressed herein are subject to change without notice.
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