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Introduction

Small business and entrepreneurship form an integral part of a healthy national economy. The valuable contributions of small businesses are widely recognized by all sectors of society, as can be seen by the many efforts to aid small businesses taking place at the federal, state, and local level. Yet, in spite of this increased awareness access to capital continues to be the most difficult challenge for small business owners. The often cited reasons why even under optimal conditions, entrepreneurs are still not successful at getting financing are: banks, by the very nature of their business, are resistant to the high-risk loans which many small businesses represent; potential entrepreneurs may lack the business savvy to articulate what they need in business terminology; and such inexperienced business persons may also fail to present a well-thought out long-range alternative plan to cover emergencies and other contingencies. Factors such as these all contribute to the decision of a would-be financing source not to commit money to a particular business.

Financing Small Business Enterprises: Sources of Information

Updated: March 2014

Table of Contents

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To help small business owners meet these challenges, the Library of Congress Business Research Center (now closed), with the generous assistance of the Lowe Foundation, prepared the original BusinessBrief on financing small business enterprises in 1994. Almost twenty years later entrepreneurs face the same challenges with obtaining funding to start up a new business or expand an existing business. On top of that the recent economic recession made it even more difficult for small businesses to secure financing as many of them suffered a blow to their credit worthiness; banks tightened their lending standards and increased the collateral requirements; and many large banks got out of the small business loan market altogether.

This revised brief is intended as a guide to representative sources of information on obtaining funding for both the newly formed and the expanding small business in the current economic environment. As such, the focus is on recently published books, current journal articles and online resources that will be of immediate, practical use to the practitioner. This revision includes sources on the latest trends in financing small businesses; new and creative ways of funding such as crowdfunding; revised editions of many popular sources on the subject; more internet resources than the original brief had; and a new section on directories that lists various online and print directories that would help an entrepreneur exploring financing options.

Regardless of the specific financing techniques discussed, certain themes are repeated throughout many of the publications listed in this brief. Chief among these is the emphasis on the importance of self-assessment in determining what it takes to be an entrepreneur coupled with caveats to those seeking financing to expect rejection before finally winning approval of their financing proposals. To this end, there are frequent discussions of the importance of developing business and/or finance plans, of placing one's existing business in the best financial position possible by effecting economies in the day-to-day operations of the company, and of obtaining competent legal and financial counsel. Likewise stress is placed on the importance of comparing one's business or potential business to industry standards for the same or a related industry or to a public company in the field which has disclosed financial information.

As these sources make plain, acquiring seed money and initial capital for start-up is likely to be only the beginning of an on-going process of financing one's business; the need to acquire financing becomes especially critical for the survival of existing and growing companies as they move beyond seed money and start-up, and seek other types of financing. Moreover, while some businesses may go through only one or two phases in their search for financing, others may go through multiple phases of the process more than once as the company grows.

While this brief is intended to provide accurate information regarding sources of information about obtaining financing for small business, it is not intended as a substitute for professional legal, accounting, or other services, and users of this guide are encouraged to obtain the services of competent professionals in these fields as needed.

This guide is based on Business Brief compiled by: Angela Wilson, Carolyn Larson, Shari Jacobson of Business Reference Services, Humanities and Social Sciences Division, Library of Congress, Washington 1994

Revised by Gulnar Nagashybayeva, Business Reference Specialist, with contributions from
Fathin Achmad, Montgomery College Paul Peck Humanities Intern.

Last Updated: 3/19/2014

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  April 2, 2014
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