Sources of Debt Financing
Please respond to the following:
- Briefly describe a small business you could envision yourself owning and discuss the most appropriate source of debt capital for that business. Explain your rationale.
- From the e-Activity, discuss how you could best use an SBA loan to get your business running or expanding. Provide specific examples to support your response.
The small business I have in mind is a simple and local restaurant. Owing to insufficient funds, debt financing would be a suitable alternative to developing my business idea. Debt financing entails borrowing funds from several creditors such as family members and banks to start-up the enterprise with the hopes of paying them at a future and agreed time the loaned money plus interests. The benefit of debt finances is that they can be unsecured or secured. A possible avenue to acquire debt financing will be through requesting an SBA loan from a nonprofit subsidiary, credit union, or local bank. An example of an SBA loan would be the Microloan program that allows all eligible businesses to apply for consideration. Debt financing only needs the interest and the principal to be repaid. Any company has full ownership of each and every penny of profit which they make through this debt-financing.