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Where to Get Funding for Your Small Business

Written by: Ken Wisnefski

Article Overview: Entrepreneurs need to start from somewhere. Where can you get money to fund your business? The following article explores your options.

Where to Get Funding for Your Small Business

Introduction


A small business in its beginning phase will need funding. Owners have to be aware of their options and sources to seek monies to support their business. Different sources have varying obligations, responsibilities, and opportunities for success.
The following article illustrates some options available for a small business owner looking to grow their business.



Banks

Banks can deliver a variety of choices for funds. Depending on your current monetary state and business, they can provide any amount of funding- small or large. The loan needs to be repaid, you will be responsible for the interest on the outstanding balance, and security must be established to cover the capital. Banks may ask the business owner to provide collateral in the event that the loan cannot be paid back.



Hire purchase and leasing


These companies grant owners funds to purchase fixed assets pertinent to their business. The assets may be vehicles, equipment, office furniture, etc. Some of these companies may ask the owner to pay up to a quarter of the balance initially, and then pay the rest in installments over a certain amount of years depending on the life of the asset. Other payments include the interest on the monies provided and the capital. The asset itself serves as the security; the asset is technically property of the provider until it is fully paid.



Invoice factors


Invoice factors grant finance to cover the period between delivering your products to buyers and receiving their payments. They provide up to 80% of the value of the invoice and can also manage the process of collections. The security comes in the form of the full value of customers’ invoices.



Others


Venture capital firms, business angels (wealthy individuals seeking to financially aid businesses), and corporate venturers (established firms who also financially aid smaller businesses) can provide risk capital.

Venture capital firms and corporate venturers usually provide the most amount of money in exchange for a piece of the small business.

Business angels’ funds will vary depending on the wealth of the particular individual. They expect to share rewards, but do not ask for security; they face the same risk as the business owner in the event of failure.



A difference


An insight to understand is the differentiation between lenders (who provide debt), and investors (who provide equity or share capital).



Before you start


It is always wise to consult financing specialists and other business professionals before making a permanent decision; they have experience, and provide detailed, individualized attention to your situation.


Establish how much start-up money is needed, and then leave a reasonable margin of safety.


Research and inquire about all of your funding possibilities.

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Article Tags: business Banks Banks, Introduction A small business, small business owner, Venture capital firms



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