Thousands of companies are started every year all around the world. Even though such businesses may be totally different, they all share a similarity. The founders raised money to start the company. Starting a business is a risk that you have to take. You cannot be 100 percent sure that it will succeed. You have to understand different ways of raising enough capital to run your business.
Let us first look at the two basic ways of financing a small business; these are equity and debt. A debt refers to a loan or credit that gives you money that should be repaid after a certain period. In most cases, the loan is secured by your assets. On the other hand, equity refers to selling stakes in your business where you share benefits and losses with the investor. Below are five helpful ways to finance your business:
You take time to save money so that you can start a business. This method is the safest, most conservative and wisest because it is less risky. In case your business fails, you will not suffer additional losses from paying those who financed you. The most challenging part is that it takes time and you may not be able to save enough to cater for all expenses.
Our take on it: This is a wise way of raising money but for risky businesses, it is not advisable to use home loans, retirement savings, or insurance loans. Consult a financial advisor in case of risky business ventures.
2. Credit Cards
Credit cards can help you extend cash flow. You can use such cards to earn discounts, get rewards, pay suppliers or get certain protections. You can as well get cash advances. However, there are limits to cash advances. Remember that how you use your card affects your credit score.
Our take on it: High rates are also charged so be careful because it may be an expensive method of raising capital.
3. Family and Friends
You can get you family members and friends to invest in your company. You can as well get a business loan from them. This method also has some challenges. You may risk your relationship especially when there are high chances of losing money. Such people may also become business partners where their opinions count.
Our take on it: Be careful and have a written agreement to stay safe. Educate your investors on risks involved.
4. Lines of Credit and Business Loans
In this case, you get money to run your company from a bank. The loan given should be repaid over the agreed period of time. For a line of credit, you pay back the facilities given on a regular basis. This method is not easy because bank has to look at your cash flow to prove that the business generates cash and has significant assets.
Our take on it: This is a great way of getting finances but it may not work for small companies that have not gained experience in the industry. Also consult a financial professional for guidance. You can hire a trusted financial expert to take you through Bidvine secured funding from Bidvine website.
5. Angel Investors
These are people or companies that invest in businesses by buying equity shares. This can be an easy way to get guidance, expertise, and money. Getting an angel investor is not easy because they have to see potential growth and a way to exit in case it doesn’t work. Most angel investors offer assistance for 3 to 5 years so keep that in mind.
Our take on it: This is a reasonable way to finance your company but first consult a financial expert to help you to come up with terms and conditions of equity sales.
Do not just depend on these five ways of raising money to finance your company. Seek advice from a qualified financial expert to get a detailed approach to business financing.