Ask your banker for additional information about

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Unformatted text preview: s” at www.yahoo.com and www.google.com. Important: Be careful in dealing with anybody who offers to help you find financing as a service for money. These are shark-infested waters. I am aware of some legitimate providers of business plan consulting and related assistance, but the legitimate providers are harder to find than the sharks. Commercial Banks Banks are even less likely than venture capitalists to invest in or loan money to start-up businesses. They are, however, the most likely source of financing for most small businesses. Start-up entrepreneurs and small business owners are too quick to criticize banks for failing to finance new businesses. Banks are not supposed to invest in businesses, and are strictly limited in this respect by Federal banking laws. The government prevents banks from investment in businesses because society, in general, doesn’t want banks taking savings from depositors and investing in risky business ventures; obviously when (and if) those business ventures fail, bank depositors’ money is at risk. Would you want your bank to invest in new businesses (other than your own, of course)? Furthermore, banks should not be loaning money to start-up companies either, for many of the same reasons. Federal regulators want banks to keep money safe, in very conservative loans backed by solid collateral. Start-up businesses are not safe enough for bank regulators and they don’t have enough collateral. Why, then, do we say that banks are the most likely source of small business financing? Because small business owners borrow from banks. A great deal of small business financing is accomplished through bank loans based on the business owner’s personal collateral, such as home ownership. Some would say that home equity is the greatest source of small business financing. A business that has been around for a few years generates enough stability and assets to serve as collateral. Banks commonly make loans to well-established small businesses backed by the company’s inventory or accounts receivable. Normally there are formulas that determine how much can be lo...
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