A small business in its beginning phase
will need funding. Owners have to be
aware of their options and sources to
seek monies to support their business.
Different sources have varying obligations,
responsibilities, and opportunities
for success.
Banks
Banks can deliver a variety of choices
for funds. Depending on your current
monetary state and business, they
can provide any amount of funding-
small or large. The loan needs to
be repaid, you will be responsible
for the interest on the outstanding
balance, and security must be established
to cover the capital. Banks may ask
the business owner to provide collateral
in the event that the loan cannot
be paid back.
Hire purchase and leasing
These companies grant owners funds
to purchase fixed assets pertinent
to their business. The assets may
be vehicles, equipment, office furniture,
etc. Some of these companies may ask
the owner to pay up to a quarter of
the balance initially, and then pay
the rest in installments over a certain
amount of years depending on the life
of the asset. Other payments include
the interest on the monies provided
and the capital. The asset itself
serves as the security; the asset
is technically property of the provider
until it is fully paid.
Invoice factors
Invoice factors grant finance to
cover the period between delivering
your products to buyers and receiving
their payments. They provide up to
80% of the value of the invoice and
can also manage the process of collections.
The security comes in the form of
the full value of customers' invoices.
Others
Venture capital firms, business angels
(wealthy individuals seeking to financially
aid businesses), and corporate venturers
(established firms who also financially
aid smaller businesses) can provide
risk capital.
Venture capital firms and corporate
venturers usually provide the most
amount of money in exchange for a
piece of the small business.
Business angels' funds will vary
depending on the wealth of the particular
individual. They expect to share rewards,
but do not ask for security; they
face the same risk as the business
owner in the event of failure.
A difference
An insight to understand is the differentiation
between lenders (who provide debt),
and investors (who provide equity
or share capital).
Before you start
It is always wise to consult financing
specialists and other business professionals
before making a permanent decision;
they have experience, and provide
detailed, individualized attention
to your situation.
Establish how much start-up money
is needed, and then leave a reasonable
margin of safety.
Research and inquire about all of
your funding possibilities.
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Kenneth C. Wisnefski is the president
of VendorSeek.com, an online business
to business marketplace that connects
business consumers with pre-approved
vendors in over 150 different categories.
VendorSeek.com has over 5,000 vendors
in their Approved Vendor Network and
processes close to 10,000 requests
per month from businesses of all sizes.
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