To start, run, and manage a business you need finances. It doesn’t matter what kind of business you need to manage whether it is small, medium, or even large it requires financing. You might be wondering where you would get the finances. There are various sources of finances to use for funding your business. The sources of finance are grouped into two:
This is where the owner of the business takes part of interest earned in ownership of the company and uses it as finance.
In this second category it means that the company takes loans and has to pay the loans with interest.
It has been discovered that most small businesses have a tendency of failing, this is not the case in big businesses. Hence the reason for big businesses having higher access to credits than the small business. The small businesses have a high rate of risk occurrence. Even though small businesses go through many difficulties there are many ways of financing a small business. That said, using websites such as SocialWick to grow your social media presence could be vital for any business.
Some of the sources of finance include;
1. Own Capital or Savings
The easiest way of financing your small business is by using your own savings to run it. It doesn’t really matter which stage of the business if the business is really in need of capital the owner can go back to his or her personal assets and use it as capital for the business. If otherwise and the business owner does not have the required amount of money they can sell their assets and use it to fund the business. This is what most entrepreneurs use when in need of starting a business. So it is advisable for one to save money so as to use it in future.
2. Borrowing Money From Family and Friends
Family and friends are a very crucial part of our life. They help in times of needs. This is another source of finance. One could borrow money from family and also friends; this would be a form of funding for your business. The money may be lended to you in either the form of loan which would be paid in interest or they may be ready to have a stake in the form of equity in the company.
3. Banks
A small business may be provided with a loan by banks,which have a department which is specifically created for such work. It is not an easy task to get a loan from the bank. You must first win their trust by following a long procedure to be qualified. Different banks have different criteria of determining whether the company is qualified. Also keep in mind the different types of loans the bank would offer. These loans include the term loans, the working capital loans or even the loans against property. As a company it is up to you to determine the kind of loan that you want.
4. Business Loans
In every country you would find out that there is an institution or bank that is created ,necessary, just for offering loans to small businesses. They offer loans to small businesses which have no access to attaining any reasonable lending channel with the best terms or either the business has not accessed any other financing method. The money given is in the form of loans hence needed to be paid in interest.
5. Individual Loans
Most likely if the company finds it hard to access business loans from banks or even family the owner may get a personal loan and use it to finance the business. To be able to earn this loan the entrepreneur must be credit worth, meaning that their history of borrowing is good. There are different ways of earning a personal loan which may include through mortgaging your house and also car.
6. Trade Credit
This occurs when the supplier is willing to sell goods to the small businesses on credit. As for this credit you discuss with the supplier with the supplier by which time it should be paid back. This source of financing is very good since one is able to deal with the short term financing problems. It is also the cheapest method of financing your small business.
7. Private Equities
Funds in private equity firms are raised from investors. After the fund has been raised it is then invested so as to be able to buy capitals of small business. This source of financing is different since the firms must acquire a position in the company in which they have rights to control it. This type of capital equity is not among any of the available stock exchanges.
Conclusion
If you wanted to start a small business and lacked finance for your business you can use the above sources of finance to acquire capital. Don’t be quick to give up just because of lack of capital you have now been given a chance to change your life.