Starting a business when you know the product and market well sounds easy. However, arranging finance for business can make you go hither and thither, giving no guarantee of success. Even the figures for loans given out by banks have drastically decreased.
In such a situation, you need to play smart and discover new and alternate sources to finance your business for its proper functioning in the long run.
Read along to know about some viable options and how can you go about the process of financing your business.
If you have money lying in the banks, there is no use waiting for the interest to pile up because, in recent years, earnings on savings have only increased by 0.75%. Therefore, we would advise you to invest your savings in your business.
Even though you might feel a bit apprehensive about it in the beginning, you will end up with business capital with no ownership loss. Plus, everything you earn will come to you for no explicit cost that you have to pay back.
Also, when the investors see the integrity of your business and sole ownership, they will feel more encouraged to invest in your venture in the future.
While impressing investors to put their money into the establishment and growth in your business is no easy task, if your business has the required potential, there is no way you are returning empty-handed. Even investors are on the lookout for the business idea that can help them grow their money.
So, in return for the stake in the business and, even a return on that investment in the future, you can have an investor invest in your business.
Before pitching your growth or business ideas to investors, you should conduct a thorough market study about the scaling capacity of your business along with the amount of funding you will need to keep it running smoothly.
There is a plethora of venture capitalists, funding agencies, and banks who are ready to invest in businesses which promise returns in the near future.
If you are okay with letting go off a percentage of ownership, then seeking investments is an excellent option for you. Also, it will not bring any debt or liabilities along.
- Business Lending
If you have an established business which needs business finance for expansion, then you can apply for business loans.
Depending upon the circumstances of your business you are eligible for loans ranging from 1000 Euros to 3 million Euros. Also, you can pay them back within a period ranging from 1 month to as long as 15 years.
Even business loans can vary in nature. While some work in a similar fashion as your personal loans, others allow you to sell your unpaid invoices or a fraction of your debit card sales in order to generate funds.
Also, the option is viable for an established business who are either suffering a financial crisis or wants to expand or the start-ups that are bootlegging.
Also, for a cheaper option, you can start revolving credit, or a credit line, which allows you to withdraw the money as and when you need it and requires you to pay interest only on the amount that you have used.
Although business loans can be expensive as interest rates can be high, you still retain your say and ownership in the business.
- Business Credit Cards
When the non-availability of supplies or raw materials is your main concern, you can use your business credit cards to avail them on credit. Business credit cards work similarly as your personal credit cards.
You can issue these cards to various members of the staff who can further use them to fund the day-to-day transactions in your business.
Be careful while selecting the ideal business card because some of them come with 0% interest for the first few months of purchase along with multiple cashbacks, rewards, and even air miles. Choose the one that brings in most benefits.
Apart from expensive interest rates once they are levied, another disadvantage of raising business finance from business credit cards is that they are only issued to already established businesses and cannot help small businesses and start-ups to set up and expand.
- Business Overdrafts
It is your bank that offers overdraft facilities on current accounts when you withdraw more than what you have in the bank. Business Overdrafts work similarly to your personal overdrafts and make the ideal option for infrequent borrowers.
The interest on overdrafts is calculated on a daily basis but is applicable only on the amount that you have borrowed. Also, the banks charge you an arrangement fee on overdrafts.
Some banks might offer you interest-free overdrafts for the first 12 months of opening the account.
However, not everyone can take advantage of the business overdraft facilities because banks only offer them to well-established individuals and businesses with high credit scores and a good rapport with the bank.
For the entrepreneurs who have an innovative business idea but no funds to launch their product into the market, Crowdfunding is the solution. Crowdfunding involves pitching the business idea online through a website or portal dedicated to the same.
If the viewers and visitors find your idea worth the money and sellable, or the perks you have to offer are successful in impressing them, they will fund your business.
Also, this idea is not limited to new companies wanting to establish their business but can be used for expansion by already established ventures as well.
The above Crowdfunding is known as Donation or Reward Crowdfunding which does not come for any cost, enables you to retain all the ownership, and allows you to keep the money as well. While this requires you to offer incentives, you can raise money through Equity Crowdfunding and Debt Crowdfunding as well.
In the end, every business requires funds to get established in the market and facilitate expansion. Then again, before you opt for any of the above sources of business finance, consider the cost and liability they bring along first.