Financing a Small Business – What are the Financial Responsibilities Involved in Running a Business?

Almost every potential business owner is faced with the trouble of seeking for ways in which finance can be acquired to run the business. However, it should be noted that such troubles are not only identified with potential entrepreneurs. Research has shown that even experienced business owners also faced such difficulties. Keep in mind that in seeking solutions to such difficulties, there will be accuracies as well as inaccuracies and these will all determine the success or failure of the business. The above is an indication that starting a business and running the business should not be an end in itself. You must seek for means through which the business will be able to stand the test of survival often posed by its competitors. The following lines are aimed at identifying ways through which a business can be financed, be it incorporated or unincorporated:

Unincorporated Business

This type of business will refer to those that have unlimited liabilities. In most cases, such businesses have not been properly documented and the status of legal personality is absent. There is no distinction between what the business owns from those of its owners. Keep in mind that in the event of any problem, the owners are personally liable for the debts of the company.

Any source of finance on this type of business organization will weigh on the owner. Keep in mind that there is no legal personality in the business and this will deter any lending institutions from providing capital to the business. What is normally open to owners of such businesses is finance through the use of credit cards or some other forms of personal savings. But the problem with using credit cards is great. Remember that you may sometimes make use of these cards out of intuition. It is simple to ‘charge it’.

For this reason, there are lots and lots of lending institutions which will be afraid or unwilling to lend to unincorporated associations. They will not want to place their finances in ventures in which they are uncertain about their future. A good number of such businesses have been known to disregard certain essentials in running the business or even in repaying back their loans.

Incorporated Businesses

These are businesses that have fulfilled all the essentials of setting up a business and that have adequate cover in the event of any crises. Such types of businesses will include limited liability companies or partnerships. In most cases, the records of these businesses are open for appraisal and the administration of such businesses will conform to the required business standards.

It is very easy for these types of businesses to receive the required finances. Keep in mind that lending institutions are more confident of their ability and willingness to pay back. Financing with such businesses will be easily obtained at any phase of the business. Remember that there are lots of individuals as well as groups who will be willing to come in with finance that the business needs. This is however possible only when the appropriate individuals or groups have been identified. This type of situation is known as angel financing. Remember that when a business is properly administered and it has a sound reputation, it will attract more investors. Investors will also find it appropriate to be part and parcel of the current affairs of the business.

Besides the above type of financing, there are also many financiers who are willing and able to invest in high risk ventures, but with an expectation of equally taking home more profits. The business can also make open its shares for acquisition by the general public. In some cases, banks and other finance institutions will be willing to finance these businesses if they see a convincing business plan. However, if you are in search of any means to finance your business, it is necessary to carry out proper research ahead of resorting to any source of finance.

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Help answer the question about business business finance loan small

Are you willing to grant a $2k-5k private business loan, payable in full within 60 days?
I own an 18-month old janitorial company with solid, well-known clients and invoicing like clockwork. I am seeking a small private loan for $2k-5k for equipment purchase and working capital. Not being in business a full 24 months has been a constant barrier to traditional financing. A list of clients, paid invoices, and reference lists are available.

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Learn more about business loan rate as well as tips and techniques in getting the right business plan template for financing projects at http://www.365capital.com, the expert resources on how to finance a business for entrepreneurs.

6 Responses to “Financing a Small Business – What are the Financial Responsibilities Involved in Running a Business?”

1. BeautyMark on January 13th, 2009 12:56 am

   try prosper.com

2. kim b on January 13th, 2009 2:08 am
3. Initial Underwriting Group on January 13th, 2009 3:26 am

   That's nice.

   The same paper that says the off shoring of millions of good paying jobs is good for our economy, is saying you can find "peers" to open nonexistent pocketbooks and lend you money.

   It doesn't happen in the real world, unless you are just trying to fund a $1000 copier purchase.

   The "Union Leader" also told the UAW and other unions that removing supplier jobs from the US to China, would be good for the economy, now they are finding out that those "jobs" were actually customers.

   The experts are idiots and anyone that is still listening to them (after all the crisis was called a "glitch" last year and they continue to tell us that 40% inflation in core food items isn't affecting Americans).

   But, believe what you want, the scam artists and crooks are praying you do.

4. Amorican on January 14th, 2009 3:35 am

   The biggest loop hole with unsecured loans is they will usually ask you to sign a PG – Personl Gaurantee. This means that even if the business folds you still owe the money.

   This loophole is outside of the usual 'Limited Liability' so my advice is NEVER sign a PG in your life.

   I got stung in one of my previous businesses by a partner and 4 years later I am still paying back the money even though the company doesn't exist anymore. Since then I have made a stand and refused to sign one and it's amazing how many businesses will be happy to put a line through it.

   The issue for you is which is it going to be? No one will lend you money with no gaurantee of getting it back – would you? If you that sure of your business plan and financial projections then I suggest you back yourself and get on with the business.

   Good luck!

5. ainz2011 on January 14th, 2009 11:24 am

   You have to write a business plan and submit it to a lender. You can find instructions on how to write a business plan and sample business plans at bplan.com.

6. g d on January 15th, 2009 4:47 am

   First of all, your credit history will not be lengthy enough. Three years of solid credit will be better.
   Second. banks and lending institutions want you to have about 30% or more equity in the transaction – meaning they will lend you about 70% or less.
   You'll need a very sound business plan.
   If you take out student loans to try to fund your share of the transaction, they'll show up on your credit history, they'll reflect on your borrowing power and banks will not want to lend you more.
   If you have a really good idea, your best bet would be to find a well financed partner who'll provide the starting capital and negotiate a partnership and go from there.

   Since this is your first business venture, try this link :
   http://www.ychange.com/small-business-consulting-articles.html
   and read some of the articles especially the ones about a business plan and starting a business.

   Good Luck

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