If you do your research, you will find that new businesses are started in the financial world every year. These businesses first raised money to create and launch their businesses and money to keep them running. While most people think capital can only come in business loans, there are various other ways to raise money to start a business.
Two basic methods are used to finance businesses and that includes:
Debt is a business loan or line of credit that gives you a certain amount of money that is then to be repaid within a specific duration of time, mostly with interest.
Equity is selling a portion of your business such that you don’t have to pay back the investment made since the new owner can access the benefits available.
Be informed that all business financing solutions contain either debt, equity, or a hybrid of both.
Business funding options
This is the safest, wisest, and most appropriate method of raising money for your business, the only downside to this is that the size of your business is determined by the amount of money you can raise. Most people usually add a home equity loan, insurance policies, and retirement plan to finance the business.
This is another safe method that you can use to run your business and extending cash flow. One can use them to buy the needed supplies and probably earn discounts but note that it is connected to your credit score.
Friends and families
One can ask for funding from friends and family by offering them an equity investment opportunity or asking them for a business loan. The only downside to this is that if the business fails and you cannot give back the loan, you risk losing your relationship.
SBA microloan program
This is a beneficial option as it provides you with a business loan of about £50000 on the condition that you have to be trained; this training can guarantee you success. It also uses intermediaries who offer you management solutions.
This one, like SBA, offers startup and ongoing concern funding to businesses, but you have to have been in operation for about six months, and your cash flow is good in that you are can pay back the money.
These are small executive groups or private individuals that usually invest in the business by purchasing equity. They offer business advice and guidance for business operations, but they can also provide money to your business. The downfall is that they always require an exit strategy to ensure they get their money back in case of business liquidation.
A business loan is where a bank or a financing institution gives you some money for a business startup, but you have to refund it within a specific duration.
If your business has a cash flow problem, this can be a good source because clients pay invoices slowly. It’s only available if you work with commercial and government clients.
Purchase order funding
Appropriate for companies that resell the goods at mark-up price while in need of money to pay your suppliers. They will directly pay your suppliers, allowing you to make large purchases.
In summary, many business funding options take time to choose the most appropriate one.