Small Business Finance Key Terms

Understanding your finance options can help you launch and grow your small business

Understanding small business finance is just as crucial to the success of an organization as having a great idea or being an effective leader. When launching a business, the ability to secure funding is key. Fortunately, there are more small business financing options than ever, through state and federal governments, and from private investors and from other companies, such as banks. By learning a few small business finance key terms, you'll be more prepared to negotiate a financing deal, and more aware of the diverse financing options available to small businesses.

 

Grants

Grants are one of the most sought-after forms of financing because they don't have to be paid back. However, they often have a lengthy and complicated application process, and are highly competitive. Still, they're an attractive financing option. There are grants for small businesses in general, as well as for women- or minority-owned businesses, or other specific criteria.
Try: Consult the Small Business Administration website for advice and resources on applying for small business grants.

Loans

If you can't win a grant, you may have better luck securing a loan. These do have to be paid back however, and you'll need to demonstrate to the lender that you have the means to do so. Most lenders offer loans specifically for small businesses.
Try: Seek out a lender such as CIT that specializes in providing startup loan money to small businesses.

Venture capital

This is funding specifically for startups. There are many firms that specialize in providing financial assistance to new, and often small, businesses.
Try: Turn to the National Venture Capital Association for advice on getting started with venture capital. Check out the group's "Resources for Entrepreneurs" section on its website.

Angel investors

While commercial financial institutions are certainly the obvious choice for seeking financial assistance, funding is also available from individual, private donors. These angel investors include everyone from third parties to friends and relatives.
Try: Check out "Ten Tips to Appeal to Angel Investors" from the Tri-State Private Investors Network.

Credit

When thinking of small business financing, don't overlook the importance of your company's credit card. In many cases, your company credit card can finance even major investments, for things like new technologies, as well as simply making it easier for employees to handle everyday purchases. More and more financial institutions offer credit cards specifically for small businesses.
Try: Most major credit card companies offer cards just for small businesses. As an example, check out the options offered by Discover Card.

Checking account

A key part of any small business finance plan is an affordable and versatile checking account, because this is what you'll depend on for your day-to-day spending needs. As with other financial services, most institutions offer checking accounts just for small businesses. These options may have a lower fee or include extra features to make it easier for small businesses to manage their spending.
Try: Find a bank with checking account options specifically for small businesses. Wells Fargo is just one of many financial institutions that offer these services.

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