Financing your business can be quite a challenging undertaking, but with a little research, you’ll find that there are many methods of going about the task. Whether you’re expanding a current business or looking to fund a startup, there are some tried and tested, as well as some experimental methods for raising cash.
Bank Loans And Micro Loans
The credit crisis has led banks to be a little more reluctant to part with their cash for small business loans. You’re going to need a clean credit history and some form of collateral if you need a large sum in one go. If your plans are more modest, you could try for a micro loan.
Commercial banks are generally not interested in lending such small amounts, so you can ask for help from a nonprofit organisation or a micro lender. These types of company offer smaller loans and usually require fewer documentation checks and their criteria is also more flexible. They might charge a slightly higher interest rate, but they’re ideal for startup entrepreneurs or for businessmen who are encountering a small capital gap and need urgent finances for purchasing new equipment.
If you’re in need of a small loan like this, you could join a comparison site: Loans direct UK review different loan company offers and present a list of possible financing options.
Credit card debt sounds a little risky. There’s always a danger of falling behind with payments, and this will result in poor credit scores in the long term.
If you pay a very small amount each month, you’ll often find that you’re paying little more than the interest of the balance. You could end up in debt for a very long time with this kind of approach. On the other hand, credit cards are great if you’re simply faced with a short term cash flow issue, and you can often find really good deals on first year interest rates and balance transfers.
Tapping Into Your Nest Egg
If you’ve just left a job after putting in several years of work and you’re trying to establish a small-scale business, you can take a look at your backup funds. If you’re older and you’ve been paying into a pension for a great many years, it might be possible to release some of the equity as a cash sum. Beware though: If your business idea doesn’t take off, you’ll be short on savings for a very long time to come.
Crowd funding is getting a lot of press of late, and can be a great way of raising money for projects. You first set up a goal for the amount of money you need to raise and the time period you’re going to require it for. After that, it’s up to members of the public to back the project with small cash investments. If you’ve got an interesting business idea, you’d be surprised at the amount of people that would be ready to fund your project. Many business owners offer advanced orders on the product for a small donation to get the manufacturing process started.
You can pledge a part or a percentage of future earnings for an upfront venture funding, though the legalities of such contracts are often dubious. Always employ the services of good solicitor if you’re planning such a move.
Funding a business project can be a challenging process, but if the planning is in place and the finances are sound, you could be at the start of a life changing opportunity.
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By Harry Price
Harry Price is a guest blogger and freelance writer. He enjoys doing private interior design consultations as a side business and takes competitive poker very seriously.