Visual representation of small business financial literacy - decorative

Module 6: Financing Options

Welcome

At some point in your business’ lifecycle, you will need to borrow money. It could be a line of credit to give you more flexibility in handling cash flow or a loan to buy equipment or expand. Knowing your options is essential to owning and operating a successful enterprise.

That’s what this section is about – reviewing the many options you have to finance your business. While not all-encompassing, these options will help you determine your own borrowing needs and the different funding methods you can use at the various stages of your business – from startup and buildout to growth and expansion.

We’ve already covered credit and becoming more creditworthy in Module 4: Building Credit. If you haven’t gone through that module yet, we recommend you do before you continue here.

Pre-Test

1. Certificates of deposit can be used as loan collateral.

a. True
b. False

2. The following may be needed for a business loan application:

a. Personal and business tax returns.
b. Business incorporation documentation.
c. Business accounting journal and daily financial projections.
d. Business financial statements.

3. Which of the following is one of the Five C’s of Credit?

a. Collateral
b. Character
c. Common sense
d. A and B

4. With a term loan (to be paid off by a specific date), the purpose of the loan and the collateral will typically determine the length of the financing period.

a. True
b. False