The Most Common Sources of Business Finance - Make Money Online

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The Most Common Sources of Business Finance

One of the biggest issues that many businesses face in their early years is generating enough financing to keep the company afloat. Initially, a considerable amount of money is required in order to set up a company. This initial capital is used for a variety of reasons, such as buying fixed assets and hiring new employees. In their first few years, most businesses find it difficult to generate enough profits to keep themselves afloat, and often need additional financing. This additional influx of cash is used for renting or buying office space, setting up the furniture and the essential services required to start operations. It’s unrealistic to expect any business to start generating such massive profits in their first few years only.
There are many different sources of business finance that companies use in order to generate funding. Here are some of the most popular sources of finance used by small to medium sized enterprises.
Personal Savings
The largest percentage of businesses are financed by personal savings in their early stages. This is the money that has been saved by the founder of the business, and invested in the company. As you might know, the biggest advantage of using that money is that you do not have to relinquish control of your company. Since it is your money on the line, you can decide how you want to run your business without any external interference. Unfortunately, only a very small percentage of people are able to fully finance their businesses using personal savings. Many such individuals often have to take bank loans in tandem with putting their own savings into the company.
Debt Financing
Another very popular option of business finance in Surrey is to go for conventional debt financing. The most common examples of these include lines of credit or operating loans taken by companies in order to invest in buying new inventory, land or buildings, or for paying off mortgages. Before agreeing on the loan amount, most debt-financing institutions, such as banks and credit lenders, will ask you to produce a detailed business plan before agreeing on the loan amount. A statement of personal net worth will also be required, along with other documents that confirm your business interests. Having a properly prepared business plan could greatly increase your chances of getting debt financing from any bank or credit-lending institution.
Strategic Alliance
If you approach an investor and show them your business plan, they might be interested in investing in your business. However, in return of the money they lend, the investors will require a piece of the business. This means that you will have to allocate a certain percentage of your company to the investors. This could be a potentially challenging decision, since most entrepreneurs are reluctant to relinquish a portion of their business, and do not want to see their hard work and effort go to someone else. It is something that you have to seriously consider before deciding to choose business financing or not.
The Most Common Sources of Business Finance The Most Common Sources of Business Finance Reviewed by Jhon on 1:06 AM Rating: 5