You investigate what is the most appropriate form of business for simplicity, liability and tax purposes and contact a lawyer and tax attorney to legally set up your business.
If you have a great idea or special skills, or you invented a new product, you are determined to start your own business. And you do, you make your business plan and you save money for the startup, it is important to plan ahead and closely calculate how much money you will need for the start up. Then, you rent a place, you purchase equipment if necessary, perhaps you even hire an employee or two.
As you go along in the first year, you see that your business is proving to be a good idea and appears to become known and frequented by customers.
You do know the statistics that tell that approximately eight out of ten new businesses fail in the first year and you do not want to fall into this category.
You keep your books up to date, you keep a profit and loss log updated every month, you know what your cash flow is, but it seems that a few problems are surfacing in trying to run a profitable business.
Perhaps you have cash problems ordering new products for sale, or ordering new materials to manufacture your product, thus not being able to maintain a good flow of merchandise to be sold or manufactured. Perhaps you cannot cover the monthly cost of leased space and utilities or the monthly salaries due to a slow cash flow.
Or, if everything goes well, you need some extra cash to expand your business if you see there is sufficient demand.
Some of the above situations will call for the need of a small business loan.
You have exhausted your personal savings at the time you started the business and you do not want to approach your family or friends, you want to be able to do it on your own.
There are multiple ways of financing a small business loan and we will address them in more details here, but first lets see what are the most important things lenders look for before lending any money to someone.