Washington State Department of Services for the Blind

Financing a Small Business

Insufficient startup capital is one of the leading causes of business failure. As a general rule of thumb, new business owners need enough money on hand to compensate for their operating expenses through at least the first year to two years. Thus it is crucial to the success of their businesses that new owners accurately estimate their cash flow needs. To do so, they begin by predicting their expenditures, usually with consultation from a reliable accountant. Besides building and equipment costs, the expenditures they consider are:

Their own salaries

Employee salaries and benefits

Loan repayment

Insurance

Marketing/Advertising

Maintenance and cleaning

Legal, accounting, and bookkeeping fees

Consultants’ fees

Licensing and Registration

Permits

Miscellaneous service charges (e.g. Phone/messenger, Internet access, etc.)

Taxes

Once their immediate and long-term cash flow needs have been assessed, new business owners are ready to pursue the next step: acquiring the capital necessary for start-up.

For approximately 75% of all business start-ups, owners rely solely upon the money out of their own pockets. That is, they finance the business themselves, investing capital from personal savings, such as checking and saving accounts; certificates of deposit; or sale of stocks and bonds, real estate, or other investments. Others mortgage personal assets or borrow against cash value life insurance. The remaining 25% of business start-ups are financed by various other means, or combinations of means: family and friends, bank loans, credit card advances, and advance payment from customers, to name a few.

Local and state government agencies are also financial sources for new businesses, although specific eligibility requirements may need to be met. For more information on how to access this pool of funding, contact a local Small Business Development Center.