Small Business Financing Structure

A company's financing structure refers to the strategy a business uses to secure financing for its operations. This includes the various sources of revenue that a company employs to obtain operating capital and profits. Several factors affect a company's financial structure.

Definition
 
For a small business, a financing structure refers to the tools and resources the business owner relies on to keep business running smoothly, make more money, pay back loans, hire staff and publish glowing financial statements. Many business experts use the terms capital structure, financing structure and debt structure interchangeably.

 
Financing Sources
 
Small businesses use a variety of financing sources to secure sufficient funds to perform tasks. To obtain funds, a small business owner can approach traditional lenders such as banks and insurance companies. A small business operator also may contact the offices of the Small Business Administration, which can offer assistance and advice in obtaining small business loans.

Growth Stage
 
One of the factors that may affect a small business's financial structure is the company's current growth stage. Businesses in the beginning growth stages tend to assume more debt so as to facilitate growth. Companies that are more established usually don't require much debt, because they are more stable and have constant revenue streams.

 
Market Conditions
 
Market conditions can have significant impact on a small business financial structure. In a stagnant market, lenders may be hesitant to extend credit or loans and because of this interest rates may be much higher. Therefore, small businesses may hesitate to take on a high debt ratio when the market is in a struggling condition.