S&P's Financial Focus

Sources of Financing

Sometimes even successful businesses have to borrow money. When a businessperson borrows money that must be repaid with interest, it is called debt financing. The money raised through the loans is called debt capital.

Make a Wall Poster Use the following information to make a chart of places where businesses receive credit.

Banks Conservative in loaning money, banks usually only loan money to already-established businesses with a successful track record.

Line of Credit Available through banking institutions, a line of credit is an arrangement whereby a lender agrees to lend up to a specific amount of money at a certain interest rate for a specific period of time.

Trade Credit This is a source of short-term financing for goods or services from suppliers to the companies they sell to.

Minority Enterprise Development Programs Businesses that are at least 51 percent minority owned, or 51 percent owned by a female or a disabled person, may qualify for funding, which is provided by the private sector and the Small Business Administration.

Commercial Finance Companies These companies offer more expensive loans than banks, but will provide money to higher-risk businesses.

SBA Loan The Small Business Administration approves and guarantees your loan, and then uses commercial banks to process and release money to you.

Small Business Investment Companies (SBICs) Privately managed venture capital companies, SBICs match funding with government-provided funding.

Standard and Poor’s publishes the globally recognized S&P 500® financial index and provides credit ratings. It also gathers financial statistics, information, and news, and analyzes this data to help individuals, companies, and governments make financial decisions. Go to www.standardandpoors.com to learn more about this company.