Sole proprietorships are usually very small businesses that have limited access to financial resources. Business credit is often reserved for larger, more established businesses that have a legal structure in place, such as a corporation or a limited liability company. Many sole proprietors drain their savings and max out their credit cards to fund business ventures. Fortunately, however, by conducting some due diligence, sole proprietors can uncover a variety of finance options from many sources.
Small Business Administration
The U.S. Small Business Administration has a wide variety of loan programs for many types of businesses. The SBA does not originate the loans but the agency guarantees loans made by private lending institutions. The 7(a) loan program is the SBA&rsquo;s primary program offered to small businesses for general purposes. Sole proprietors may finance company expenses, such as working capital, furniture, building renovations and leasehold improvements.
Angel investors provide private equity for sole proprietors and other small businesses to fund startup operations or finance existing business ventures. Proprietors are usually required to complete an application and submit business plans to a network of investors. Applications are pre-screened and reviewed by investors that show an interest in the proprietor&rsquo;s business ideas. Once accepted, the sole proprietor is able to obtain startup capital or other benefits from the investor.
Many private organizations fund business operations that would not qualify for traditional financing through banks. Private investors provide loans, lines of credit, equipment leases or other capital to proprietors that have exhausted most other funding resources. Sole proprietors could also obtain financing through business partners or other associates that have the cash to invest but lack the interest to perform business operations. Financial partners are often silent and do not make any business decisions but they usually receive a portion of the company&rsquo;s profits.
Grants offered through the federal government or private organizations help sole proprietors fund business ventures if they meet certain criteria. To qualify for federal grants, small businesses must meet size and income standards. To be considered for a wider variety of grant opportunities, sole proprietors may apply for business grants as individuals. Local governments also provide grants for proprietors. State economic development agencies often provide grants for businesses that engage in activities that stimulate the local economy.
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