Funds And Financing For A Small Business

Running Head:Lake Shore Book Store (funds and financing)Gregory KittleApril 17, 2008AIU OnlineAbstractÐ' Ð' Ð' Ð' How I am going to fund my Lake Shore Used Book Store. I will be using three different forms of funding. They are government grants, government bonds, and line of credit. I will explain how they work and the risk involved in each one. For the larger expenses I will have to use financing. I will use two different forms of financing to finance my business. They are small business loan and business credit card. I will also explain how each of these works and the risk involving each one.Ð' Ð' Ð' Ð' In my Lake Shore Used Book Store all my funding has come from a rich relative. I have come to the point I am ready to go out on my own and get my own funding. First I would like to do is get a small business grant. A small business grant is free money from the government to start any type of small business. To qualify for this kind of funding I have to be a United States citizen. Small business grants do not require credit checks, collateral, security deposit, or co-signers. You can also qualify even if you have had a bankruptcy or bad credit. This type of funding really does not have any risk involved. The money does not have to be paid back. The only problem with a government grant for small business is that the funds may be limited. So you have to apply before the funds are gone.Ð' Ð' Ð' Ð' I will also get a government bond. A bond is a debt security, similar to an I.O.U. It is the most secure, because the government backs them. So there is very little risk in government bonds. The issuer promises to pay a specific rate of interest during the life of the bond until they repay the face value of the bond when it comes due. So you are making money on the interest you can put into your business. Since, you will be receiving interest income. You don’t really need to do anything to qualify just have the money to be able to afford to lend the money to the government in the form of a bond. The only disadvantage to a government bond is you will not have access to the money you lent out.Ð' Ð' Ð' Ð' I can also go to my local bank and get a line of credit. A line of credit is a fixed amount of money that my used book store can draw against. You have to apply for a line of credit just like you apply for a loan. You only have to pay interest on the amount you use not for the amount available to you. And only have to make payments when you are using it. The line of credit is useful because it is usually for an unlimited amount of time unlike if you had a loan. To qualify you must meet all the credit requirements that you would have when applying for a loan.Ð' Ð' Ð' Ð' These are three forms of funding that I can use to help finance my Used Book Store. With the government grant and government bond there would not be any risk over financing through my relatives. Because, with the grant it is free money I do not have to pay it back. With the government bond I will be making money. The risk of using a line of credit is that it will likely cost more due to the interest I will have to pay. And if I do not have the money to make a payment the bank will not be as understanding as my relatives might be.Ð' Ð' Ð' Ð' In the future I will be financing my business in two different forms of financing. I will get a small business loan (personal loan). And will also get a business credit card. I plan on financing my business mostly on the profits I will be making when I become more financially secure.Ð' Ð' Ð' Ð' There are a couple of forms of financing I can use to run my used book store. First I would use a small business loan. A small business loan is an amount of money borrowed by a small business person to