Small Business Finance explained Small business finance is a key element of any viable business enterprize. The lack of sufficient funding has led to the demise of a great many sound business ideas and business. However acquiring small business finance, in sufficient quantities is a constant concern for business owners. Business owners and entrepreneurs who understand the various sources of small business finance and the advantages and disadvantages of each type, have a highly competitive advantage over those who lack this information. Lets consider each small business finance option in turn:- 1) Business owners own 'spare' capital - this is the only 'free' source of finance. This will be money 'lying around' in saving accounts, will be perhaps rainy day money and the only cost incurred by investing it in a business to the bank account. Interest that would be lost. Importantly, few business owners are in this postion. It is also worth pointing out that if the amount saved is substantial the saved interest, were it to be invested, would also be significant. 2) Loans from family and friends - This is a particulary common source of finance. Business owners who choose this route may prefer this form of small business finance as it is potentially more flexible and possibly cheaper than many other otions. However, there may be more emotion attached to such arrangements especially if problems were encountered when repaying such loans. 3) Credit cards - The use of credit cards can be an effective way of helping to smooth the cashflow problems encountered during the peeks and troughs of cash flowing into the business. However, credit card interest is relatively high compared with the interest charged on other types of loans. 4) Unsecured personal loan - Not all business owners are able to access this form of loan. However, unsecured personal loans can provide a welcome cash boost for a business and may be helpful as long as the repayments are affordable. 5) Secured personal loan - The key points of a secured personal loan are similar to that of an unsecured personal loan. However, a secure personal loan requires a capital asset, such as a family home 'to be signed over' as security for the loan. Often this will be the business owners own home. If the loan cannot be repaid the home can be sold to repay the debt. 6) Venture capital - venture capitalists will provide business finance in return for a share of the business and its profits. Frequently, they will also want a say in the way the business is run. This can be an opportunity to bring new skills into the business as well as for conflict. Inveitably, business owners will seek small business finance from a variety of sources taking into account the risks and rewards of each. Furthermore, what is right for one business owner and their business may not be right for another. All that can be said is that the prudent use of any of these sources of capital could be beneficial to any thriving business. The decision about which type of small business finance, and at which point in the development of the business, depends on the business skills of the business owner and their advisors.