An old saying goes, ” you have to spend money to make money,” This is the basis of funding.
Many companies and businesses seek funds to grow the business. Funding refers to providing resources to finance a need, program, or project. It can either be short-term or long-term.
As a business owner, you need to raise external funding, or capital, in order for you to expand your business into new markets or locations. You might even want to invest in research & development, or take out your competition. Companies need to raise capital in order to invest in new projects and grow – and there are only a few sources of funds available to all firms.
If you are looking for funding for your business, Collected Reviews has some very useful tips from people who have been down the same path as you once – and if you wish to finance your startup without a traditional bank, here are a few reviews about online banks that you could reach out to for funding.
How Do You Source For Funds?
As mentioned earlier, there are only a few sources of funds available to all firms and each financing opportunity has advantages and disadvantages.
As a business owner, you must understand each option, their different parameters and the best way to subsidize the financial needs of a growing business.
Before you start sourcing for funding, you need to create your business plan. Your plan will determine how much money you need and for what it will be used.
Most Common Types of Funding
Where do you stand in terms of growing your small business, and what funding remains available to you? Read up.
1. Friends, Family, Founders, And Fools.
This is the first place a small business typically starts. These are the first people that put something forward to help a business get on its feet. Since many small businesses require a leap of faith, “Fools”, opportunists or believers in the potential of a business are of great value when it comes to funding your business. These arrangements usually end up as partial ownership or loans.
Banks are usually the first source a company approaches for funding but if the close network of the founders doesn’t help, the bank is the next best option. Whether it is a start-up business or a business seeking an SBA loan, you need a line of credit since interest rates are generally the cheapest. Most banks’ requirements for securing a loan and their low cost of capital afford banks the opportunity to maintain lower rates. The most common downside to this option is that a startup or younger business will most likely not have the assets necessary to secure a loan but on the bright side, bank loans allow you to maintain equity; their interest will always be debt.
While you search for the best funding source for your business, take time to study the benefits and drawbacks of each financing option before you decide on the one that will help you meet your business goals.