Buying a business is exciting, but it can also be confusing. Navigating financing is one of the more complex issues you’ll need to address before purchasing a small business. We explore options for financing a business in Charlotte, NC so that you can find the right fit for your needs.
GETTING STARTED: FINANCING A BUSINESS IN CHARLOTTE, NC
When it comes to selecting a type of business financing, you need to take your whole situation into account. Whether you’re open to small business loans or on the hunt for an investor, there are pros and cons to every option. We discuss the basics of what you need to know to determine the right choice for your business.
WHAT ARE THE BENEFITS OF FINANCING?
Financing gives you working capital that you can use to start, grow, or shift your business’ direction. Most new business owners will find themselves in need of some form of financing. It gives you the flexibility to work towards your goals, and it can also be beneficial to investors in your business who hope to enjoy the spoils of the returns.
WHAT ARE THE MAIN TYPES OF FINANCING OPTIONS?
- Self-financing: Also known as bootstrapping, when you self-finance, you rely on your savings, money from friends and family, or pull from your retirement account. This is common for startups but isn’t always feasible if you need a significant amount of working capital. However, it’s good to assess your personal finances before you start looking at other institutions.
- Debt Financing: Debt financing is a prevalent option, with 43 percent of small businesses applying for a loan in 2019. Much like a mortgage or car payment, you’ll pay monthly until the balance of your debt has been paid off. Banks and credit unions can offer different terms, but, often, your best bet is to seek a loan backed by the U.S. Small Business Administration (SBA). Come prepared to submit your loan application. Financial institutions will want to look at your business plan, expense expectations, projected financials, and credit history.For North Carolina businesses, it’s worth looking into options through the Carolina Small Business Development Fund (CSBDF). The local nonprofit offers flexible terms and interest rates, particularly for those that struggle to qualify for a traditional loan program.
- Equity Financing: If you need more capital than friends and family can assist with, equity financing options can help. While you can skirt the risks and costs of a credit card or business loan, this option isn’t without drawbacks. Equity financing typically happens with angel investors or venture capitalist firms. Instead of paying back a fee, they take a percentage of your business. You’ll need to be prepared to work with this person as you make business decisions, especially if they have a controlling share.
WHAT IMPACTS APPROVAL FOR BUSINESS FINANCING?
Depending on the type of financing you’re interested in, lenders will want different information. While family and friends mainly care about your idea and its proof of concept, lending institutions will want to take a closer look at documented information. At a minimum, expect these parties to assess your personal and business credit scores, plans for growth, and cash flow.
Analyzing your financing needs is a crucial step in the business buying process. A professional business advisor can help you find the right business for sale in Charlotte, NC, and prepare for the process ahead. For expert assistance buying a Charlotte-area business that suits your goals, get in touch with the professionals at VR Business Brokers of Charlotte. We offer unmatched experience and personal service every step of the way.