While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second. Whether you're starting a business or expanding one, sufficient ready capital is essential, as is having the knowledge and planning to manage it well. These qualities ensure that entrepreneurs avoid common mistakes such as securing the wrong type of financing, miscalculating the amount required or underestimating the cost of borrowing money.

Before inquiring about financing, answer the following questions:

• Do you really need more capital, or can you manage existing cash flow more effectively?
• How do you define your need? Do you need money to expand or as a cushion against risk?
• How urgent is your need? You can often obtain better terms if you plan ahead rather than seeking financing under pressure.
• How great are your risks? All businesses carry risks and the degree of risk will affect cost and available financing alternatives.
• In what state of development is the business? Needs are most critical during transitional stages.
• For what purposes will the capital be used? Any lender will require that capital be requested for very specific needs.
• What is the state of your industry? Depressed, stable or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.
• Is your business seasonal or cyclical? Seasonal needs for financing are generally short-term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.
• How strong is your management team? Management is the most important element assessed by money sources.
• Perhaps most importantly, how does your need for financing mesh with your business plan? If you don't have a business plan, make writing one your first priority. All capital sources will want to see your plan for the start-up and growth of your business. See Creating a Business Plan.

Not all money is the same. There are various funding options you need to know and different types of financing you should research. Learn more below.

Start-Up Costs – Learn how to identify your expenses to determine your start-up costs.

Personal v. Business Financing – Get your personal finances in order before going into business.

Types of Financing – Check out the various funding opportunities available to today’s entrepreneur.

Debt Financing – Don’t let inexperience as a new business owner keep you from getting the financing you need.

Equity Financing – Learn how this type of financing works and the differences between investors.

References:
• Small Business Administration

Featured Benefit Financing Get the working capital you need for exporting and insuring your international transactions through Export-Import Bank of the United States, an independent U.S. government agency. > Learn More

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