Editor's Note: Entrepreneur's Ask the Expert column seeks to answer questions about everything from starting a business to growing one. To follow the column on Twitter -- and ask a question -- use hashtag #ENTexpert, or leave a comment below. Your query may be the inspiration for a future column.
Editor’s Note: YoungEntrepreneur’s Ask the Expert column seeks to answer readers’ questions about everything from starting and running a business to raising funding and growth strategies. To follow the column on Twitter -- and to ask a question -- use hashtag #YEask, or leave a comment below. Your query may be the inspiration for a future column.
Q: What's the best way to grow your business without taking on investors? Are there government loans out there for small businesses?
- Chris Perkins
A: The best way to keep from taking on investors is to make a profit. The second best way is to get your suppliers to give you generous payment terms so that you don’t have to pay for things right away.
It is hard for small businesses to borrow money unless they have collateral that banks consider to be valuable. So, for example, if your business was a gold jeweler, a bank might consider your inventory to be sufficient collateral against which to loan you money. If your only assets are the people in the company and maybe some software they’ve written, you will have a tough time getting money from banks.
But there are sources of debt for small business. For instance, through the Small Business Innovation Research (SBIR) program, the National Science Foundation gives grants to startups that aspire to harness the value of novelty.
You might also try the Small Business Administration’s 7(a) Loan Program that helps small businesses with special requirements, such as exporting to foreign countries; its Microloan Program for small businesses and not-for-profit child-care centers; or its CDC/504 Loan Program that offers business financing for small businesses while promoting growth and job creation.
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The author is an Entrepreneur contributor. The opinions expressed are those of the writer.
Peter Cohan is president of Peter S. Cohan & Associates a management consulting and venture capital firm. He is the author of Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision (Berrett-Koehler, 2012).