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Business Funding

Jul 30, 2008
Starting a business is an exciting and challenging prospect. What better way of taking control of your future by owning your own business. Many people start their own businesses because they don't want to have a boss themselves. Maybe they look at their own boss and believe they can do a better job. If you think this then you are probably right and should go for it. Some of the famous entrepreneurs started out the same way, worked for companies, learnt from their mistakes and then went off and did a better job themselves.

Every business needs some kind of funding and there are many options available to you. Some of these are listed below:

Bank Financing

Bank finance is one of the most obvious routes to take when it comes to business finance. However getting a business bank loan these days is getting harder. Most bank will not give you the time of day unless you can offer good security and an equally good track record of business success. Banks generally provide money on a secured basis and will ask for a personal guarantee (PG) or they might take into consideration and assets you have like your home for example. All banks vary in terms of what they can offer startup businesses so it is important to talk to a few of them before making a decision. A good strategy would be to visit your existing bank first and then look around some others.

Self Funding

Self funding is always the best option if it is available to you. Self funding means finding the money yourself through either your savings or borrowing off friends and family. You could also look into releasing some of homes equity if you have any. Be very careful when it comes to borrowing off friends and family. Make sure they have a clear understanding of how and when their money will be repaid. You don't want to lose or fall out with any friends and family so think very carefully about borrowing off them and making a contract with them with regards to the repayments would be wise.

Equity Finance

Equity financing is money acquired from the small business owners themselves or from other investors. Equity finance can be the saviour of many small or new businesses who are trying to raise funds for their business.

Equity equals true risk capital as there is no guarantee that the investor will get there money back. The big advantage however is that the money that is invested into your business from equity finance never has to be repaid. Investors to your business are prepared for risk capital in return for a growth share of your business profit.

Overdraft or Credit cards

Credit cards could be an option if you just need a bit of back up for unexpected purchases. Some businesses have very low initial set up costs which is where credit cards of bank overdrafts can be a good choice. Many banks are offering interest free rates for the first year which might just sort you out.

Business Angels

Getting hold a business angel is another good option. Business Angels are called this, because they often save struggling firms with both finance and advice, when no one else will. Angel investors understand the needs of new businesses due to having successfully set up their own company.

What type of funding you choice depends on your needs and your current situation. Many people try to get bank loans but when refused they then look into other options like equity funding or business angels. Whatever finance you decide to use for your business venture, make sure you make a realistic and informed decision based on your business needs. There is a lot to take into account and you need to ensure that you have all of your business information/facts sorted before making any decisions.
About the Author
Carolyn is the webmaster of Angel Startups experts in offering all aspects of Business Funding.
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