in this blog post you we Discover how to finance a Business.
Money is the root of all business. In order to properly start and run your business, you will need some amount of capital. The amount depends on your needs and your goals. plan will contain this information. It is vital to properly capitalize your small business and to develop resources and methods to obtain further capital.
A company without proper financing will have a tough time competing with established competitors. Additionally, this will raise the risk of your business eventually closing down or going bankrupt; neither of which you want.
Capital is basically the money used to run your business. When you start your business, chances are that your first source of capital will probably be your own wallet or your savings account. You are the first and, maybe, the only person that will be interested in investing in the company you are setting up. Therefore, you must be prepared to put in your own hard-earned savings to help your business through its first few months. The fear of losing your investment in the business should, naturally, make you work hard to succeed. If it is a part-time business,
You may use income from your regular job to finance it.
Many other sources of start-up capital exist. These include selling stocks, loans, friends, partners, family, and venture capitalists. Let’s
examine more in detail.
SOURCES OF CAPITAL/FINANCE:
(a) Business Loans
The bank is often the first place small business starters think of when it comes to financing. While some banks offer loans to small businesses, some do not. It depends on the policy of the bank and the criteria they have established to loan money. Typically, a bank will loan money to a client if the client has collateral or has impeccable personal credit qualifications or can repay the loan with any on-going income other than from the start-up business.
The criteria banks use to lend money are the amount and purpose for which the loan is to be used, the primary and secondary sources of repaying the loan, the company data, such as management and operations, the financial data, which includes balance sheets and cash-flow statements, your personal credit history, and the viability of the company.
Most loan is usually secured by the equipment, personal or company assets, or the land that has been purchased. However, some banks may ask for full collateral.
Getting a loan from a bank is difficult; you should know this upfront Most starters will not get it. However, if you can grow your business steadily over a period of time, banks will be more inclined to lend you money because you have proven you can operate your business, Many small business starters will simply have to grow first before approaching a bank.
However, you may still get a loan. Some ways of enhancing your odds are to appear well-dressed, calm, and answer questions honestly and directly, and to have a killer business plan. Remember that honesty the best policy. If the bank turns you down, you can try other bank Some first-time business start-ups have gone to several, if not dozens banks, before getting a loan. Be patient and persevere.
(b) Personal Loans
Another option is to get a loan in your name, as opposed to the business name, or a personal loan. The most popular types of personal loans today are home equity lines of credit, both of which are based on the value of the equity you have in your home.
2.Friends and Familles
Often, a small business can raise money through friends and families.
especially at start-up. Again, you should treat these people will professionalism and honesty by explaining the potential risks and
Another type of this source of financing is your business colleagues other business people you may know, have worked with, or have networked with in the past.
3.Sell Some of Your Assets
Some people sell homes, cars, furniture, lands, or other possessions start their business. You will have to be careful here because wouldn’t want to sell something you will want or need later on.
Taking on additional business partners, either in the form of fellow incorporators or limited partners, is another method of raising capital.
Often, an investor will agree to become a limited partner on the strength of your plan and your personality. In this situation, your partner is strictly a financial backer. He or she will want to see a return on investment but Will not want to participate in any other work of the company.
The federal and state governments have a variety of departments and programs to aid small businesses. Information on these can be sourced from your state, chambers of commerce and industry, etc.
Sometimes foundations and non-governmental organizations offer
grants and incentives to small businesses.
A venture capitalist is an individual or organization that invests in companies with potentials for growth and profitability.
Venture capitalists are professionals that are not easily won over. In order to attract one and to sell your company’s prospects, you have to
be a professional yourself. Asides from meeting you, a venture capitalist Will want to see your plan and your financial (balance sheets and cash-Flow) statement. The capitalist will determine whether your company has a past record of success that will bring about a future record of growth. If your company fits this profile, you might interest a venture capitalist.
Those going into business for the first time may not be financed this way, so the best way is to start your business, grow, and then prepare a Proposal with an appropriate firm.
A part-time job before, during, or after your start-up can provide capital and will be proof to potential investors and lenders that you are serious about financing your business.
9.Business Networking/Brand Name Sharing
This is where one or more businesses combine to share one brand name, although each produces different goods. For example, let’s say a group of automotive suppliers cannot get their products on shelves
They can sign an agreement, put the common brand and logo on all products, and use a combined marketing/distribution system to sell the goods. This really works and can increase each participant company’s
market share dramatically.
Although this is not capital per sec, it’s a way of helping you sustain your business at start up. It is also a way of increasing cash flow and revenues.
10. Use Another Business’Assets
Maybe you have one part-time business with cash flow but limited growth opportunities. This business could provide eventual start-up capital for a future business with greater growth potential.
barter! Business by barter is relatively new and growing. Here, participating companies exchange goods and services. If you are unable to raise any capital by yourself, you might have to raise a business plan for presentation to a financier or put your venture on hold. Again, the best way of getting money is to first raise some personal money. That is why most businesses must start small. Don’t give up. though some companies have started small and grown big while some started big and failed. In essence, capital is very important, but must be used properly in conjunction with your plan and your goals.
12. Equipment Leasing
This is basically a loan in which the lender buys and owns the equipment and then “rents” it to a business owner at a monthly rate for a specified number of months. At the end of the lease, the business owner may purchase the equipment for a current market value, or continue with the lease.
13. Hire Purchase
Hire purchase is an arrangement whereby the buyer asks a finance company to buy a piece of equipment, hires it for a specified period and then exercise the option of buying it for a nominal sum while all hire charges and installments are being paid. As long as the installments are being paid, the hirer has right to use the equipment.
If you, therefore, have need for a certain equipment and you do not have the money to buy it outright, you can explore the possibility of obtaining it under hire purchase terms,
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