Sources of business financing

PERSONAL SAVINGS

The greatest percentage of businesses is financed for startup using personal savings. The most obvious advantage of using personal savings to start up or expand your business is that you relinquish no control over your business. However, it is relatively rare for a business owner to have sufficient personal savings to completely finance his or her business. Personal savings are often used in conjunction with other forms of financing, i.e., bank loans. Bankers tend to see a significant investment of personal savings as an important indication of a business owner’s commitment to the business.

“LOVE MONEY”

This is money loaned by a spouse, parents, family or friends. A banker considers this as "patient capital", which is money that will be repaid later as your business profits increase.

When borrowing love money, you should be aware that:

• Family and friends rarely have much capital.
• They may want to have equity in your business; you must be sure you don't give this away.
• A business relationship with family or friends should never be taken lightly.