By hearing the word financing, the first thing that we know about financing is that it is the process of providing funds for business activities, making various purchases or other investments because business finance refers to money and credit which is being employed to the business. Financing also involves procurement and the utilization of funds.
But on the other hand searching financing in any economic climate can be a bit challenging, whether you are looking for capital to expand, start-up funds or money to hold on through the tough times. So securing funds is also tough as well. The common thing that all these people have in common is that they all had to raise money to finance their company, to cover corporate expenses and to get the business off the ground.
- The basics- Debts vs. Equity
When it comes to small businesses then we see that there are two basic ways of financing that is debts and equity.
- Debts- are actually a line of credit which therefore provides a set amount of money that has to be repaid again within a short period of time. In most of the cases, loans are generally secured by an asset which thus means that the lender can take those respective assets away if anyone fails to repay the amount.
- Equity– is actually the selling part of the business. So in this case, an individual does not have to pay back the investment because the new owner of the equity thus gets all the rights of voting, all benefits and the cash flow which is associated with that equity stack. But the best solution for an individual depends on the specific circumstances and requirements.
Therefore, here we have concluded an overview of some of the most common methods of financing business.
- Using a credit card
It is a seriously risky business to fund business by using a credit card. You just have to pay the minimum amount each month. However, on the other hand, a credit card can get one out of the occasional jam and can even extend ones account payable periods to shore up one’s flow of cash.
2. Tap into your 401(k)
If anyone is unemployed and is, therefore, planning to start their own business then the funds which an individual have accumulated in 401(k) over the years will, therefore, look pretty tempting.
3. Attract an Angel Investor
For the attraction of an angel investor, then there are some of the tricks and some of the tips to win over angel interest.
- Do not be a fad follower: If anyone wants to cash in the latest trends then angels can thereby spot the difference and won’t give much attention to those whose companies are essentially get-rich-quick schemes.
- Know your stuff: One will need competitive analysis, market assessments and solid marketing and sales plan if someone expects to get anywhere with an angel. And young companies also need to demonstrate an expert knowledge of the market where all are about to enter as well as the discipline to flow through with their game plan by follow the best effective ways to capitalise the business.