A L Bean & Company

April 21, 2011

Does Your Company Need New Funding?

Filed under: Accounting,Consulting — Tags: , — artlbean @ 12:03 am

A recent Federal Reserve survey’s preliminary findings show that many small business owners have recently given up on bank financing. A survey of 6500 consumers appears to show that more than 70% of the nation’s start-ups use personal savings or assets as a primary source of funding. Just 6% were funded by personal loans, while 3% took out business loans or maxed out credit cards. This seems to show that personal funds have become increasingly more important when it comes to financing a small business. This isn’t to say that banks won’t eventually become a greater resource. As the economy improves I would expect this trend to change somewhat.

I have spoken to many bankers recently and most of them say that banks have increased their credit standards for personal and business loans. While a mediocre credit score may have gotten you approved in the past, a great credit score is what many banks are now looking for. While banks have to protect their assets, this doesn’t necessarily come as great news to small business owners. As they say “it takes money to make money”.

We encourage business owners to look at traditional ways of financing as well as non-traditional ways of financing. Finding investors that are family members, friends or friends of friends can be a way to improve your chances for financing. Also, determine your credit score and find ways to improve your score, if needed. Try to work on financing solutions and credit score issues as soon as possible. If you are thinking of starting a business six months from now, start now focusing on financing. Many business owners find themselves scrambling when the need is dire. Put yourself in a position to be “credit worthy” well in advance of needing credit.

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