It’s a way of factoring all of the other expenses your business incurs into the cost of your product. If your net profit is low, you might need either to decrease your operating expenses or increase the cost of your product. Financial statements might seem intimidating at first, but once you get a handle on them you’ll love the peace of mind that comes with having a strong grasp of your business’ finances.

1. In equity funding, you give investors an equity stake in the business.
2. A business line of credit offers a flexible way to borrow money on an as-needed basis.
3. I just didn’t want to deal with the whole process of going through a bank—I wanted to focus on the business.
4. Debt financing involves borrowing money from a third party, which you then repay, with interest.

They start by selling a product or service, and funding growth through sales. However, most businesses will eventually need financing in some form to grow. They want a piece of the pie, usually in the form of stock in the company. They may also want to give input on the business, offering ideas and expecting them to be implemented. As the name suggests, the loan amount is smaller (up to $50,000). Typically made by nonprofit Community Development Financial Institutions, they may be available to startups or to business owners who have overcome bad credit.

Equipment Financing

Well-kept books can give you a sense of where your business’s high and low points will be over the course of the year. They can show you if your packaging costs are too high or if you’re overspending on marketing. If your business is still more of a side hustle, or if its finances are simple, you likely can skip enlisting the help of a CPA for now. There are plenty of small-business finance resources online you can reference. In this section, we’ll look at three areas integral to keeping your company’s financial health on track. If your business involves shipping product to customers, packaging and unboxing will play a significant role in how a customer experiences your brand.

Create a professional business plan

Investors can give you funding to start your business in the form of venture capital investments. Venture capital is normally offered in exchange for an ownership share and active role in the company. Many business owners feel intimidated by the financials when writing their business plan.

Templates and resources for better financial management

If you want to avoid taking out a business loan, or simply can’t qualify for any debt financing options, there are several ways to fund your business that don’t require debt. It’s a smart idea to keep your personal and business finances completely separate. If you register your business as an LLC or a corporation, you’re legally obligated to have a dedicated business bank account. While you don’t need to open one for a sole proprietorship, it’s a good practice to adopt.

The self-funding effort has limits, however, as they don’t want to draw from their retirement accounts. You may also want to get a business credit card to build up your credit and earn cash back or other rewards. The U.S. Small Business Administration (SBA) helps small businesses get funding by setting guidelines for loans and reducing lender risk. These SBA-backed loans make it easier for small businesses to get the funding they need. If you don’t do a financial review at least once a month, you’ll struggle to understand your business’s performance, and growth will constantly be out of reach.

Financing options for small businesses

Many can also provide you with a pre-approval— to let you know if you’ll have good chances of qualifying, your general loan amount, and the costs— before you ever apply. Because they are often more flexible, online loans will typically be more expensive than bank loans. If you need cash quickly, though, this is an important option to consider. If you own a business with even one vehicle, you will probably encounter a need for commercial auto loans. Once again, if you’ve ever bought a car, qualifying for one of these loans will be familiar.

Instead of being forced to use x amount of money, you can use only what you need, which ultimately helps you manage your business finances better. In many cases this helps you to not pay interest on funds you don’t really need. If you’re just finding your footing as a business or need to cover small expenses, a business credit card is a solid place to start. You typically need a good credit score of 670 or higher, but they’re otherwise easier to qualify for than a business loan.

This makes them ideal if you need funds quickly to cover a cash flow gap or emergency expense. The best way to finance a small business varies based on factors such as why you need capital, how fast you need it and your business’s qualifications (e.g. credit score, time in business). Since credit unions are journal entries to issue stock often community-based, you’ll want to find a local option. You can use MyCreditUnion.gov to browse credit unions in your area. But the co-op nature of credit unions often ties them to the community, so you may also reap the benefits of more personal relationships and name recognition. If you want to retain complete control of your business, but don’t have enough funds to start, consider a small business loan.