Financial Marketplace

Financing Your Business: A Guide for Sustainable SMEs 

By Alexandra Myagkova and others

There are two main types of financing available for most businesses: equity and debt. Equity is the money  raised by shareholders and put into a business; debt is what is borrowed from others to invest in it. Because SMEs are not usually large enough to gain public attention or private investment, most of their external sources of funds relate to debt. While seeking sources of financing for business operations, your SME should not immediately rush to external sources of finance. In other words, obtaining a loan from a lending institution should not be the first choice for funds. Many other potential sources of equity must be exhausted before an SME can reasonably turn to debt financing.

The following guide is a step-by-step reference for SMEs considering external sources of financing. It is meant to provide information useful for SMEs to assess their financial needs and strategically plan their budget in a way that allows for each source of financing to be used most efficiently. Though this guide does contain introductory material, even experienced SMEs should find valuable, relevant information for their financing search.