Posts Tagged ‘ways’

Question: what are the ” sources of finance “for new businesses ? what are the ways you can raise cash for your startup?

Answer:

Answer by JackN
One way to find out would be to go to someone who launched a business (the best time to find store owners in their stores, for example, is around 10:00 AM Tuesdays) and ask them how they got their startup capital.

Before I got into business with you, I’d need to know how honest you were and how good of a money manager you were. I’d also want to know how much cash you are capable of saving up and where it had been coming from. Some people, lacking contacts who trust them to the degree that they’d loan them money, start businesses with their own savings. Unsecured loans such as cash advances on credit cards are the next best thing.

If you’re looking to get cash from someone else to go into business with you, and you haven’t demonstrated the ability to consistently save up cash yourself for your own business venture, I’d say you were an accident looking for a place to happen. Believe in your dream enough to save up what you need, and others will eventually follow and join in the example that you as a leader set.

7 Ways to Get Small Business Financing

Money is always an issue for small businesses, especially when starting out.  However, the need for cash injections can continue long after you get that first dollar.  Even same industry businesses can differ greatly, but they all have in common the need for money as well as the places they can go to get it.  Here is a look at seven opportunities to get cash for your small business.

 

Small Business Loan

Probably the most known source for small business cash is the small business loan.  This most often comes from a bank or the SBA; for startup capital or an expansion.  The lender looking at your proposal needs to feel that you are a good investment and you can help them decide in your favor.  Wherever you go to get the loan, there are several things you will need in order to give your business its best chance to get that loan.

Your business plan will tell the lender about your business and you.  They will see how much planning you have done, your grasp of the industry, and how effective the loan will be.

A good cash flow projection tells the lender not only how you will pay them back, but when.  Your best bet is to show hard, but honest numbers.

Your personal financial statement helps the lender to understand where you are coming from and where exactly your business is at.  After all, you’re tied to your business at the hip.

Bring past business tax returns if you have them.  It will show the lender how your business has done and how you have managed money in the past.

Your credit rating is key for establishing trust.  The lender may be giving money to your business, but they are forming a pact with you.  A credit report will fill in the rest of the details of who they are about to trust with their money.

 

Microloans

From the SBA, the microloan program may be a perfect fit for your current financial needs.  With a maximum of ,000, a microloan can be less daunting to acquire, if not a little easier than a small business loan.  The most common use for a microloan is short-term working capital and equipment purchases.  Since most microloans require collateral of some kind, the best use is probably equipment, since the equipment can then be the collateral.

 

Supplier Credit

While this source of income may not work with all businesses, it is ideal for manufacturers and retailers.  A supplier makes money by you buying their products, but if you can’t first buy their products to make yours, they lose a sale.  If you cannot be billed – net 30 days – or if it may take longer to receive your money, it is possible to work out a deal with your suppliers.  An ideal situation is to procure credit out to sixty days.  If that isn’t possible, maybe they will take a percentage of the sales of the end product on top of the cost of the supplies.  This temporary solution could generate higher interest than a loan, but in some situations, it could be your only choice. 

 

Angel Investors

Best in times of growth, angel investors can be a boon to help a small business get over the hump to where they need to be.  Angel investor loans fill the space left after you’ve gotten your small business loan and other capital.  Unfortunately, they are few and far between and spending too much time looking for them can be even more detrimental to your business than cash problems.  The best time to look for an angel investor is when you already have growth, you’re approaching the breakeven point, or you’re expanding.  The worst time is when you’re hemorrhaging money.  Take care, you still have your business to run.  Plan to spend four to six months looking for an angel investor, but use only a quarter of your time.  Like getting a small business loan, be ready with all that proof that you are worthy of an angel’s blessing.

 

Credit Cards

It’s a source of quick, red-tape free cash, but credit card cash advances can eventually kill your business if you’re not careful.  Always keep in mind the high interest charges when you are looking at credit cards as a cash source.  Use them, but only for quick-turnaround, time-sensitive, and/or small scale solutions.  Treat credit card advances like you would a fire; it’s great for quick warm ups, but really hurts if you leave your hand in there too long.

 

Home Equity Loans

Like credit card advances, a home equity loan for your business is a personal risk solution.  They are more attractive however, because of their lower interest rates.  The catch is that if things go south, you lose your home.  Depending on how personally invested you are in your business, this may not be such a different outcome from credit card advances, or even small business loans if calamity strikes.  The main thing to remember when considering the bad side of a home equity loan is that due to consumer protection laws, it’s a much longer process to seize your house than it is from a normal bank loan. 

 

Family or Friends

Nothing ruins a friendship or splits a family faster than money problems.  When you are considering approaching the people you are closest to, you must know the best way to handle the situation, as well as the potential pitfalls.  Some common relationship killers due to business loans is the recipient squanders the money, doesn’t use the money as indicated, doesn’t pay the money back, or doesn’t pay it back in a timely or agreed upon manner.  If you can avoid those situations, you’re way ahead of the game.  The best course for loans with friends and family is to handle it as professionally as a bank loan, or even more so.  Make sure there is a formal agreement with signed paperwork stipulating how much is to be loaned, collateral, interest rate, how it is to be repaid, and what happens if it cannot be repaid.  If you spell out everything on paper, there is no room for disaster due to misunderstandings.  Remember always:  these people trust and believe in you… don’t make them regret it!

ACC501 Business Finance

Some Ways To Small Business Financing

In as much as small business do not require a large capital base to start off, these funds may not always be readily available. Business owners are therefore forced to look for other strategies through which they can finance their ventures. It is worth noting that one source of finance may be better suited for a given enterprise but not another, especially considering the repayment plan.

One of the most convenient ways of financing a small enterprise is to use ones own savings. This is because, you will be left to repay yourself at your own convenient schedule and even if the venture happens to fail, then you can just let it go without being harassed from left, right and center to repay that money. You might lose your investment, but nobody will be on your neck.

Government grants and loans are also another source of funds. They are cost effective and reliable. The government has established the Small Business Administration agency that assist small enterprises raise funds with which to set up the ventures. The repayment plans are quite pocket friendly and the interest rates are quite affordable even to the smallest venture in terms of turnover.

Another way to finance your venture is to borrow from private lenders. Although their interest rates may be higher than those of the government, they are less likely to reject your loan application on the basis of your financial background, be it good or bad. If this borrowing fails, or does not play music to your ears, then you can consider financing your venture through partnerships, where you and your partners bring in a given amount into the venture, which will be repaid after your enterprise has realized profits.

Three Ways To Obtain Business Finance Money

Business finance money is a necessity for the beginning small business as well as the large, thriving corporation and practically every type in between. Every company has to address the issue of where they are going to financial resources they need to maintain their operations. A brief consideration of the question yields at least three primary answers to the dilemma that most businesses will face. It should be instructive to highlight these ways briefly so that you have a better idea of what is involved.

First, one of the most obvious ways bigger companies obtain financial assistance is through selling shares in their companies on the stock exchange. This also called equity financing. This option not only handles some of the pressing monetary needs of the company by receiving money from each shareholder when they purchase shares. Each shareholder then has an interest in the company and is paid interest the shares they bought. This interest is called dividends.

Businesses can also use debt financing. This method is simply another way of saying that you must seek business finance money by borrowing it from outside financial institutions like banks and credit unions. This form of financing is common with businesses of all types and sizes. A business will most likely some sort of loan to in the beginning since useable capital may not be readily available to the investors, entrepreneurs, or proprietors. Debt financing via loans is by far the most common of all types of financing. There is another type of debt financing that is not always considered when search for business finance money.

Debt financing can involve the issuance of bonds. While bonds are similar to stocks that are issued by companies, bonds are counted as liabilities to the companies since they are like getting loans from investors. At the same time, investors are the ones who typically choose bonds since they are less risky to invest in than stocks. Bonds provide a set interest rate that is paid to the investor while the principle is protected even if all else is lost to changes in the market. Basically, the company issues a set number of bonds and if all are purchased, they get that money up front to use for the pre-determined purpose then they will have to pay the investors back for their assistance.

These methods of financing are the basic three methods used by most companies to obtain business finance money, but with some risk involved.

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