Financing a small business or a startup company is usually one of the main challenges encountered by entrepreneurs. It can determine the success of the business. There are a couple of options to go with, all of them varying in terms of difficulty of acquisition. There are factors which can influence your choices of finance, such as urgency, the amount required, and terms of repayment among many others. The most popular options are highlighted below.
Small business funding options
This is commonly the most attractive option for most entrepreneurs. You can approach a bank and set up a meeting to request for the loan. To qualify for the loan, you will be required to fill in an application and work out a payment plan. Depending on the bank, you may also be required to have some form of collateral or security for the loan. For some banks, the business itself can work as security for the loan, especially for businesses that are not startups. You will also be charged some interest on the loan, which is how the bank profits by giving you the loan. To access the loan money, that is if you are awarded the loan, might take some time ranging from a couple of days to a few weeks.
Another option would be to finance your business using your assets. You can do a calculation of all the assets you have such as your vehicles, real estate, or savings among others, to see what you can spare to invest in your small business. This method of finance has the advantage of not having any interests charged. You also get to retain full ownership and control of your business, which is crucial when it comes to business decision making.
Product presale financing
There is also the option of selling products before launching your business, as a way of sourcing funds. This is what is known as product presale financing. The only drawback for this is that the goods have to be fully developed for it to work. You must have complete confidence in the product to ensure that it will not affect your brand and your future sales.
You can get a venture capitalist to invest in your business and help you grow. For this method to work, you must meet all the stringent requirements that they usually have. You must also be ready to offer a certain percentage of the initial investment as returns. Offering some equity of your business might also work.