Although there are some businesses that were started with pocket change, most new businesses require money when starting up˳ The majority will need to buy equipment, establish a workplace and incur marketing costs – all before a sale is even made˳ As soon as the business starts trading, then there will be a requirement for cash to pay the bills and keep the business running˳
There’s a range of financing options when starting up and running a business so it’s essential to choose the right ones to match your current status and your future requirements˳ Good planning will make it easier to raise the money the business requires˳
It’s essential to have a written business plan to explain your business to banks and other potential resources˳ A good plan helps convince investors that you know what you are doing and that it’s worth risking their money in your business˳
When you are choosing the best financial options, you might explore the advantages and disadvantages of the following resources:
1˳ Using your own money from savings, investments, equity, etc˳
When starting a business, you’ll most likely have to put up at least some of the money˳ Most banks or investors will not put money into a business that the owner isn’t willing to fund˳
2˳ Borrowing from family and/or friends
Friends and family may be more willing to lend money to you than a bank˳ Their repayment terms could be easier for you, but do treat them like any other serious source of funding by having a business plan showing how their money will be used˳ Understand that this could put a strain on your relationship particularly if your business starts to struggle˳ Never ask them to lend you more than they can afford to lose˳
3˳ Bank loan
Overdrafts, credit cards and bank loans are the most common sources of finance˳ The overdrafts and credit cards are the most expensive way of borrowing˳ Banks will certainly want to know that you are a good risk˳ They’ll ask for a business plan, evidence of a successful track record, security and your own investment˳
4˳ Outside investors or partners
Acquiring outside investment can be suitable for promising businesses that don’t expect to produce a lot of extra cash in the short term, but offer the potential of greater returns over a longer period˳ Business angels typically invest $10,000 and more along with offering business expertise˳ Whereas, venture capitalists usually invest more than $2,000,000 in businesses when they believe they will receive a high return on their investment when exiting,
5˳ Grants and government support˳
The main advantage of grants is that it’s cheap financing˳ Check into subsidized or zero interest loan along with possible outright cash grants˳ Quite frequently the support schemes will offer advice, information or subsidized consulting˳ However, it’s important to note that there’s strong competition for grants˳
Using a combination of these alternatives could be a consideration for many businesses depending on their needs and circumstances˳ As an example, you might invest your own money in market research; and then seek outside investors to share the risk and borrow from the bank to fund equipment and machinery purchases˳ Carefully explore your options to make the best choices when you are starting and growing your business˳
Source by https://ezinearticles˳com/?Finding-Funding-For-Your-New-Business&id=6766185
