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Funding Options For Business

Posted on 07 November 2017 by admin (0)

Gotta Have the Funds

A lot of entrepreneurs have to seek out some extra money either to keep their business alive when going through a rough time or to help with its growth. So, planning how to fund your business is not really a topic that can be discussed in a short amount of time. Basically, if you want to externally fund your business, there are two ways to do it.

Using Debt 

If you decide to use debt, the investor will receive a note for their money. This note contains the important information regarding the terms of payment, which include interest and timing. There is one important benefit of using debt, and it is that you retain the complete ownership of your company. 

 

However, there is one downside when it comes to using debt, and it is that you are obligated to repay. Failing to meet this commitment can lead to a lender forcing your company into liquidation. 

 

Using Equity 

And then there is equity. Using equity to fund your business means finding an investor, and then turning over an ownership stake to them in exchange for their money. The benefit of using equity is that you are not obligated to repay, but the downside, however, is that you have to give up a part of the ownership of your business. This is something that can result in you losing some control over your company. 

 

Different Sources of Funding Your Business 

When it comes to both debt and equity, there is a lot of different sources of funding your business. Read on to learn about some of them. 

 

– Self-Funding 

A lot of entrepreneurs fund their businesses themselves. They do this by using their savings or personal debt. This can also be done by selling some of your belongings to generate money. 

 

– Family and Friends 

Your family and friends can provide you with either debt or equity funding. And even though this may seem like a good funding source, you need to be careful when it comes to selling a part of your business to them. Sometimes businesses just simply fail. So, make sure that your family and friends are aware of all the risks. 

 

– SBA Loans 

The Small Business Organization has a lot of useful programs that you could benefit from. Generally, in order to use these loans, you have to guarantee that they will be repaid. 

 

– Banks 

A traditional bank can make a small business loan. However, traditional banks usually require a track record and they often want the loans to be secured with assets. 

 

When it comes to funding your business, there are many more options that you can choose from. However, funding can be secured when you are persistent and have a good business plan.