We could go public and offer shares to raise money to invest into the modifications, but the problem with this is that as a business owner you will not get to keep 100% of the profits; you will be paying your shareholders a dividend. Equity investors will require a percentage of ownership as well as the return on their investment. This can also wind up being costly down the road. Another option is to acquire a loan, but most lending institutes will only lend 60%-70% of the requested amount leaving the borrower having to raise the other 30%-40% in equity. This may not be a bad deal if the equity investor does not demand a large portion of ownership and is patient on returns. Another option is a 7(a) loan since they are the simplest and most common loan type from the Small Business Association. The financing of a 7(a) loan can be guaranteed for a variety of general business purposes such as working capital, machinery and equipment, furniture and fixtures, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets (http://www.sba.gov). These types of loans are easily obtained since many banks in America participate in SBA’s program and structure the loans according the requirements of this program. The SBA shares the risk with the bank if the borrower defaults. The eligibility requirements are fairly
We could go public and offer shares to raise money to invest into the modifications, but the problem with this is that as a business owner you will not get to keep 100% of the profits; you will be paying your shareholders a dividend. Equity investors will require a percentage of ownership as well as the return on their investment. This can also wind up being costly down the road. Another option is to acquire a loan, but most lending institutes will only lend 60%-70% of the requested amount leaving the borrower having to raise the other 30%-40% in equity. This may not be a bad deal if the equity investor does not demand a large portion of ownership and is patient on returns. Another option is a 7(a) loan since they are the simplest and most common loan type from the Small Business Association. The financing of a 7(a) loan can be guaranteed for a variety of general business purposes such as working capital, machinery and equipment, furniture and fixtures, and debt refinancing (under special conditions). Loan maturity is up to 10 years for working capital and generally up to 25 years for fixed assets (http://www.sba.gov). These types of loans are easily obtained since many banks in America participate in SBA’s program and structure the loans according the requirements of this program. The SBA shares the risk with the bank if the borrower defaults. The eligibility requirements are fairly