ABSTRACT
This chapter provides an overview of the various types of debt, examining how each type of debt works and for what it is best used. It discusses external debt as a source of funding for entrepreneurial ventures. An entrepreneur who has started successful business ventures in the past will have less credit risk, as will a business with a profitable operating history. Asset-based lenders offer an alternative for entrepreneurial ventures that may not be bankable under normal criteria for bank lending. Many entrepreneurs are able to secure debt financing through loans guaranteed by the Small Business Administration (SBA), an agency of the federal government. Entrepreneurs must learn to develop a good working relationship with their bankers and create a strategy that can include an array of sources of debt funding. Sources of long-term debt include banks, real estate lenders, and leasing companies. The Small Business Administration can guarantee bank loans for some small business uses.
