There comes a time in the life cycle of almost every small business when the owner needs more money. For many, this occurs right at the beginning. After all, think of the numerous upfront costs there are: equipment, furniture, rent, utilities, manufacturing costs and advertising to find employees, all of this before the doors are open. It then can take years to turn a profit. Some new accounting and bookkeeping companies run into roadblocks further down the road as well - just consider the effect the Great Recession had on the small business industry as a whole.
So where can accountants who own firms look for additional dollars to help fund their businesses? There are so many different options that are available to new company owners. They can range from very traditional to somewhat unorthodox, but it depends on what the leader decides is right for the business.
Asking for help
One of the first places the cash-strapped owner goes is to friends and family, particularly those who are well-off. This can be a great plan - people who have an interest in making sure the firm succeeds might be quick to help.
That being said, accountants need to consider all possibilities. It might seem easier and faster to skip contracts, but legal documentation is always a smart idea to outline the details and make sure everyone holds up their end of the bargain. Plus, what if the business fails or the relationship goes south?
While filling out a bank loan application is definitely a possibility, actually getting the money might be a long shot. Entrepreneur Magazine reported that since the recession, these institutions have been ultra hesitant because of risk and the low likelihood of making a profit.
Smaller banks and other organizations like credit unions, however, might be a little more willing to lend.
Short term loans are also a possibility. The magazine noted that these loans tend to be disbursed quickly and are often approved for large sums. Plus, owners with less than stellar credit scores can often find relief with these options.
Just be careful to read the fine print to ensure the interest rates and terms of repayment are agreeable.
Small Business Administration
Business News Daily detailed that the Small Business Administration (SBA) offers two types of loans for owners who start a company in almost any field in need. One of the loans they offer is the 7(a) guarantee loan, which is common and is relatively easy to apply for at banks. The terms are often long and tend to provide a lot of protection for those involved.