Techniques for Conserving Capital for New Businesses

Whether you are in the beginning stages of opening your business or if you have been open for several months you quickly realize as a small business owner that the most important thing driving your business growth model is access to capital.  Many small business owners (SBO’s) access the equity in their homes, obtain capital from investors/relatives, tap into retirement funds, and utilize personal credit cards in order to get operations started.  No matter what industry you are in your business needs a place to operate, a product or service to offer, and equipment

Owning and operating a business is EXPENSIVE in our ever changing and competitive economy!  There are your fixed operational expenses like rent and utilities that remain constant and then there are expenses inventory, raw materials (for those making a product), payroll, accounting, and advertising that will fluctuate with business.  And if your business is successful you will need to may need to add personnel buy more materials and expand your marketing efforts in order to stay competitive and see continued growth.

Often, an SBO will use a credit card or funds in the business checking account to fund long term assets like equipment and then when it comes to build an addition to accommodate new employees or more manufacturing or increasing marketing there isn’t enough cash to do it and the credit cards have reached their limits.  The lack of access to capital for short term needs now prohibits growth and puts the SBO in a precarious position.

One way to keep your businesses options solvent is to finance your capital assets (equipment) over a period of time of 2-5 years.  This will allow you to keep more cash on hand to pay for those short term fluctuations in your business.

There are a few ways to do this.  One way is to contact your local bank and submit an application for a business loan.  Typically, banks will steer a customer towards an SBA Loan and while SBA loans can have attractive low rates, they usually have very strict underwriting guidelines and turn around time can be slower.   Another option is to ask the company you are purchasing the equipment from if they offer financing or if they work with any equipment financing company.  The advantage to this option is that they may have special promotions geared towards the equipment you need and it is typically quick.  The third option is to seek out an independent equipment financing company.  There are multiple benefits to this option as these entities pride themselves upon having more lenient credit criteria than banks, a quick turn around time, and offer longer and more flexible terms than the promotional programs thru the dealer.

For information about equipment financing for start-ups contact a representative at Harbour Capital Corporation at 800-609-7778 or visit us at

Regardless of which type of company you choose to pursue financing with there are several things you need to have prepared in order to obtain the best rates and programs and ensure a quick credit decision.

  1. Make sure that your business name has been filed with the appropriate state entity.
  2. Make sure you establish a business checking account and a verifiable business telephone number that can be found in the phone directory.
  3. Try to maintain a clean personal credit profile.  If you have old outstanding collections, suits or judgments try to clean them up and obtain proof of payment and supply that to the credit agencies ASAP.  It is often time consuming but in the long run it will save you thousands of dollars.
  4. Understand your business credit and set up a business profile with Dun & Bradstreet (go to )
  5. Have two years of tax returns readily available.  Be prepared to explain any negative info.
  6. Purchase some accounting software that will allow you to keep a balance sheet and income statement each month.  This will show verifiable numbers to the lender that your business is growing and showing strong gains and in turn increase your chances of approval.
  7. Provide a written copy of your business plan. (if available)
  8. Finally, be prepared to tell the lender how the equipment purchase is going to help your business expand and provide concrete numbers; such as the purchase will eliminate a manual process and save “X” number of dollars and increase overall company profits by      “x”%.