The Vault
Finding the money to finance your small business
by Graham Barber

Most small business owners need access to finances at some point, whether nit's to get the business up and running or to make sure it continues operating. Every business requires different financing needs, which is why it is always a good idea to talk to a personal banker about your options. Here are some financial options to consider;

Self generated The first source of business financing is always you, the business owner. Your existing cash and investments can provide interest free capital and your home or other fixed assets can be used as collateral to borrow against. Having a good credit rating is also important to secure debt financing at favourable rates.

Term loans and lines of credit

Interest rates are still a at historic low, which means borrowing to invest in your business remains less expensive than it has been in previous years.

Two of the most common forms of debt financing are term loans and lines of credit.

A line of credit will allow you the flexibility to draw money when you need it. They're like an "open loan" that can be used whenever the situation demands, such as covering short-term expenses while you wait for money to come in from customers.

Term loans are also flexible but can be a good option when you are planning to purchase an asset and require a certain lump sum of money that you'll repay over time. In general, the time of repayment will be matched to the useful lifespan of an asset purchased.

Credit cards

More than 70 percent of small business owners use credit cards to fulfill some or all of their financing needs. They can be a very convenient source of shortterm cash to buy equipment and cover day-to-day business expenses. Many offer interest grace day periods which you can take full advantage of and borrow interest free.

Credit cards can also give you instant creditability with suppliers, since they establish you as credit worthy and guarantee immediate payment.

Credit cards also make it easy to keep track of expenses and manage your cash flow since your spending activity is usually detailed in a monthly statement.

However, don't get carried away. Exercise caution with the number of applications you're filling out when applying for credit, according to Brian Holt, Director of Small Business at Scotiabank.

"Try to keep the number of credit cards to two. This keeps everything in check, makes planning and book-keeping more manageable, and can minimize fees," says Holt. "Instead of applying for new cards when you need access to cash, consider having the limit of an existing credit card increased if you really need the extra borrowing power. Having multiple credit cards can signal lenders that you might be at risk of getting in over your head."

Scotiabank has the knowledge and the resources to help small business owners succeed. With a small business expert in every branch, Scotiabank is here to help small business owners find the money to reach their goals. For more information, see your local branch or visit www.scotiabank.com/small business.

The proceeding information was provided by Graham Barber, Branch Manager of Scotiabank, Alcona Branch.

The Scotiabank, Alcona Branch, is located at 1161 Innisfil Beach Road, (705) 431-6116.

The Vault is a weekly series of articles provided by Graham Barber with financial advice and suggestions.