Six ways to finance a business
Finance is the lifeline of a business. Several aspiring entrepreneurs have an idea to run their business but lack the capital to actually start it.legalraasta content
So finding finance in any economy can be exigent, whether for start-up’s or for capital to expand or to hold on money through the tough times. Banks cannot be the only source to rely upon. Fortunately, there are a growing number of opportunities for business’s to finance their businesses without dealing with restrictive and nonflexible banks. Here are six financing techniques for financing.
1. Crowdfunding –
The internet deviates the way maximum corporations do business—including business financing. With access to a substantial number of people, if the entrepreneur is able to convince just a relative few that his business or product idea is good enough, he can swiftly and relatively easily generate a lot of interest-free financing.
2. Self-financing –
Obviously, if the entrepreneur had the money, he would have used it to finance his business already. But even when the entrepreneur thinks he has the money or doesn’t want to put his savings at risk, he still has several options for self-financing:
• Credit cards – Inflated interest rates usually disregard credit cards as a workable financing decision. But there are three reasons to reconsider them: First, a budding number of low-interest credit cards are available that can give them instant access to funds at surprisingly low-interest rates and annual fees; Second, if the business person pays his credit card balance each month, he pays no interest. It’s like receiving a short-term interest-free loan; Lastly, he can also claim benefits of all the “interest-free” offers will get to try a new card.
• Line of Credit – A personal line-of-credit is a good source of long-term financing at better rates than most credit cards.
• Home equity loans – It’s never prudent to put the‘home’ at peril to fund a business project. If, however, the investment is sound, leveraging ‘home’ equity can be a great way to get a huge amount of money for commercial activity.
• Whole-life insurance policies – Depending on the policy and insurance company, the business person can possibly borrow against the cash value of his whole life insurance policy.
3. Government & private grants, subsidies and rebates –
If the industrialist is ready for a little research and paperwork, different levels of government offer grants, loans and tax incentives for a number of commerce investments and initiatives. Many private companies also offer grants and funding for certain types of ventures, including work related to their business, industry or cause.
4. Independent finance companies –
Well-liked with small business owners who want the security and lending power of a financial institution without the hassle or constant pressure of a bank, independent finance companies are more customer-focused than traditional banks.
5. Private investors –
Finding an angel investor or venture capitalists can be an alternative, but there comes a drawback with it, that is using them will often mean giving up a share of the business in exchange for the funds.
6. Factoring –
Sometimes, a business factors (i.e. assigns) its receivable assets to meet its current and immediate cash needs. Assigning or selling your receivable assets, usually accounts receivable (i.e. invoices), to a third party (also known as factor) at a discount is called factoring.
One needs money to make money. Financial resources are an absolute must to begin operations and for expansion & growth. Money needs to flow in an out of the business. Sound planning, effective marketing & efficient production, all depend on a smooth and consistent flow of funds. Planning the finances of the business starts with making an estimate of the total funds required for all the needs of the business.
Hence, a financial plan needs to be made, which signifies the financial needs, funds raising sources and the use of those funds.