This type of financing involves borrowing money with a promise to repay the amount borrowed, plus interest. Debt financing can come from selling bonds, bills, or notes to lending institutions, individuals, and sometimes, to investors.
If your business has a high equity-to-debt ratio the SBA recommends debt financing. Debt financing involves selling bonds, bills, or notes. Debt financing simply means going into debt (borrowing money to be paid back). Sources of debt financing (borrowing on credit) include:
- Banks and Savings and Loan Institutions
- Commercial Financing Companies
- Personal Loans From Family, Friends, or Other Individuals
- State and Local Resources for Small Business Debt Financing
Because banks and other lenders may be hesitant to offer long-term debt financing to small business owners, the SBA offers guaranteed lending programs. These programs reduce financial risks to lenders making it easier for small business to obtain long-term debt financing.
The SBA’s programs may help you get a loan, but lenders will still look at owner equity (how much you have already invested in your business) and will likely require personal guarantee of repayment.
