As you are starting, it is common to look for financing that would support your business ideas, put it into action, or grow what you already started. There are different ways in which you can raise funds for your project, and we will discuss some of them below.
- Bank Loan. Applying for a bank loan is the most traditional way of getting funds. A bank offers a lower interest rate compared to other lending institutions. However, in many cases, your business must already exist for at least two years for you to qualify. Also, banks are careful as to the risks involved in providing loans, so their process of approval is quite long and tedious. Other banks prefer if you have an account with them.
- Lending Companies and Institutions. Due to a long process by banks, borrowers tend to apply for funding from other financial institutions. These companies also offer services and loans perform by banks such as business financing, car loans, and current or savings accounts. They have lesser requirements compared to banks and are more flexible. However, they charge higher rates as they take more risks.
- Crowdfunding. Crowdfunding is on the rise as a source of financing. You must present your ideas that you are asking for funding. You should also specify how much you plan to raise in a specific period. The crowd can then choose how much they want to invest in your project. What can people get from their investment? They are given rewards according to how much they spend.
- Angel investing. Generally, angel investors are individuals who want to invest their money in promising and with high potential start-ups. Angel investing is the method used by some largest companies in the world when starting up. To get the interest and trust of angel investors, you must present a pitch to them that shows your determination, passion, and enthusiasm to make your project succeed. Also, angel investors can be your source of advice and connections for future endeavors.
- Using a Credit Card. Financing your business through a credit card can be used for transactions that need immediate financings, such as paying your suppliers and vendors. This method can be helpful if managed well. However, you must keep track of your transactions and make sure to pay within the due date to avoid penalties and finance charges, which can file up over time if you are not careful.
- You Can Consider Factoring. Factoring is a funding method wherein you sell receivables for a discount for upfront cash. The technique is often used by businesses that need large inventory and longer receivables turn-over. Companies using this method usually pay a certain percentage of the amount as a fee. Be careful to use this funding, though, and only consider if you cannot think of other options as it can be costly to do so.
The funding method would depend on the kind of industry, size of the business, and other factors that suit your business need. Make a careful assessment as to the source for funding to maximize the borrowed or acquired capital for your business start-up or expansion. To accurately project the money needed for your company, you can use readily available financial model templates from EfinancialModels.