Say you have started a sole proprietorship business, in which you use your knowledge and skills to earn an income. In the beginning, you need little investment except for a home office set-up. However, after some time in the business, you may want to expand. You need to rent an office and hire employees. This will take a considerable amount of capital, which you may not have available simply by reinvesting profits from your business. If your business requires substantial amounts of plant and equipment, the necessary investment will be much larger. On source of finance could be family and friends. They may be willing to buy shares if you have incorporated the business. Thus you can raise some capital by selling shares to acquaintances without making an IPO (Initial Public Offering). If that is not sufficient capital, the next thing is to investigate what loans are available to you. The object is to obtain loans and investment capital, without creating undue interest payment burdens on your business.



The U.S. Small Business Administration makes funds available to non-profit organizations who then issue what are called micro-loans (under $35,000) to small businesses. These loans are relatively long term; they can be for up to six years.

You could also try to obtain bank loans. Getting money from bank is tough. They may want to loan money to you only on the basis of taking your accounts receivable, which are then paid to you at about 80 percent face value. This is called factoring. Commercial bank loans are easier to get for businesses that have been around. New business that want a straight operating loan may be forced to put the equity of their home or other real estate owned up as security.

Other possibilities are taking cash advances from credit cards at introductory rates. This can get messy since it forces you to get new credit cards with introductory rates every six to twelve months and then transfer your credit card balances to the new cards.

An alternative capital source is to obtain credit card receipt advances. The lender will purchase your future MasterCard or Visa receipts. These loans can be for up to $100,000 and also include a 10 percent to 20 percent deduction of the face value of the receipts. Another option is a business credit card, which has a credit line of up to $25,000 and is based on your personal credit, not your business.