How to Borrow Money, Part 2

the debt financing

the debt financing means borrowing money that must be paid back over a period of time, usually with interest. It can be short: less than one year and long term more than a year. You do not leave any ownership rights by taking loans and limited liability to pay the loan back with interest. That is why a loan for new businesses usually secured by one or more of the following: the owners' personal guarantees, real estate, property companies, etc.

deficiency in respect of capital financing is that you need to make scheduled payments, regardless of your company's financial situation.

debt sources can be divided into two groups: non-professional such our relatives, friends and employees, etc. and professional such as banks, credit unions, etc.

financial institutions, by itself, has traditionally provided short-term financing for small and medium-sized enterprises: a line of credit, equipment loans, etc. Long-term loans in many cases the Small Business Administration guaranteed loan program that helps leverage the risk for financial institutions.

There are some advantages and disadvantages in both equity and debt financing. Higher capital structure will depend on many different factors. For more sophisticated cases, I suggest you hire an experienced financial adviser.

Points The borrower is usually assessed before being given the money:

1 How good is your credit history

2 Do you have a strong collateral

3 Will you be able to repay the loan

4 Does your management team have enough management experience

your personal financial situation, starting a business

It's always a good idea to build your personal credit history. In the very beginning of your business no credit history and the lender will use your personal information for the assessment of lending conditions. Order a personal log to see where you stand and check for any unexpected errors.

from your personal budget. You must realize that usually you will not be able to take any cash from the new job for a while. Make sure you have enough money to start a business venture and not enough money to pay your bills until your business will become a money producing.

Create projections and classify your future business expenses. Some of the costs will be a one-time costs such as fees for incorporating your business, some will be ongoing, such as inventory, insurance, etc.

There are two types of costs: variable, such as inventory, sales commissions, etc., and fixed, such as rent, utilities, etc. If you do not have enough knowledge to do the budgeting and forecasting to be could bitidobra idea to hire a professional to do that.