Are You Financially Balanced?

Is your business growing? Or has it stagnated during these last few years due to the economic downturn? Like most of us who own their own business, going to the next level is always a big step: a step that takes more than just courage, optimism and a great concept.

It also takes money. Purse strings are tight, and to reach out and ask for financial help can be more than a little scary. The big question is what type of financial help you want—I mean, other than just asking for money. Are you open to giving up part ownership? What about paying interest on the money you receive?

The two means of financing available for your company are:

1. Debt Financing, which is when you borrow a set amount of money for a predetermined period of time and pay a predetermined interest; and
2. Equity Financing is receiving an injection of funding in exchange for an ownership stake. The percentage of ownership is based on the amount the investor is paying per share and how many shares he's purchasing.

But how do you determine which form of financing is right for you? Both of these financing options have advantages and disadvantages. Before we go any further, let me clearly state this: Your final decision, before doing anything, needs to be based on education and knowledge. Your specific business situation is unique to you and your financing options, no matter which path you choose. It is unique to you, and there are two professional resources you need to seek out and tap into before venturing into the wild world of financing. Those two resources are a CPA specializing in financial investment and associated tax laws, and a lawyer specializing in fundraising and associated state and federal business laws.

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