Financing a business isn’t something that happens overnight. It takes effort and sometimes outside funding for your dream to become a reality. If you were short on funds in your personal life, you might be able to secure a
payday loan, but if your business is low on cash, your options are a little different. However, you aren’t alone in your dilemma as there are plenty of business finance options out there. Keep reading and discover the 5 key funding options for you company…
- Business Loans
By far the most common form of business funding is a loan. These generally come from direct lenders and financial institutions and can vary in terms of their duration. Each lender will have it’s own stipulations that you’ll have to adhere to in order to qualify for the loan too and it’s essential that you understand them beforehand. You’ll be assessed on your affordability, credit score, profits, and losses, amongst other things so you want to make sure that your business is in a good place when requesting finance. This does seem slightly paradoxical to say you need to be in a good place to request help, but lenders want to be able to see that you’re a viable business and that if they lend to you, they’ll get their money back. Each loan will have it’s own interest rates too, so make sure you’re aware of them as well. Loans provide you with a lump sum of cash which can be extremely beneficial for your business to receive all at once, just be certain to do your research on lenders before committing to anything.
- Equity Finance
If the idea of a loan doesn’t appeal to you, then you could look at equity finance instead. This type of finance is where you sell a part of your business to an investor in exchange for funding. This can be a great way to help bring more money into your business and some of the investor’s expertise can be invaluable. However, when utilising equity finance, you need to be okay with handing over some ownership of your company. When you have an investor who now owns a percent of your company, you’ll also need to run business decisions and ideas by them as well. Equity finance can be good for your business long term as the investor will most likely want your business to succeed, so it’s unlikely that they’d let your business fail.
- Business Credit Cards
Daily spending can be tricky for businesses as you might not have the funds when you need them. However, a business credit card can really help with this problem. Your business credit limit will most likely be a lot higher than your personal one and it means you can spend as and when you need. It can be better for you than a loan in some ways as you don’t accrue as much debt in one go. For instance, you may spend a couple hundred one month, and then barely anything the next. This allows you to stay in control of your business debt and keep it from getting too high. Credit cards tend to have more flexible monthly repayments too and will only require you to make a minimum amount payment each month. Some businesses like to use a credit card for all their monthly spending and then pay it off at the end of the month. This can also help to build up your business credit score too!
- Crowdfunding
If you don’t want to get into any debt at all, then crowdfunding could be for you. This type of funding is where you ask the public for financial support and normally, businesses will offer something in return. You don’t have to pay the money back either as it’s been donated to your business. Crowdfunding can be a great way to raise money for your growing company, but it does have its drawbacks. For example, if you don’t garner enough interest for your business, people aren’t likely to donate any money to you because they won’t know who you are or won’t believe in your business. Crowdfunding works particularly well for niche businesses as people will want you to succeed and use your services thanks to your innovative ideas. Relying on crowdfunding can sometimes not work in your favour, so make sure that if you don’t raise enough funding that you have something else to fall back on.
- Business Grants
Another debt-free way to raise funding for your business is through grants. These provide you with a lump sum of cash that doesn’t need to be paid back to the payee and is awarded to different businesses based on certain criteria. A lot of grants are paid out via the government, so the application process can be quite lengthy. Although grants are a great tool for businesses, you should solely rely on them for your funding. This is because your application isn’t guaranteed to be approved as lots of people apply for them every day. The application process can take a fair few weeks as well, so if you need the funds sooner rather than later, they might not be best for you. However, with all that being said, business grants are fantastic and can help provide you with the financial support you need without putting your business into debt.
There are so many different types of financial funding available for businesses, that it can be hard to know which is right for you. Before choosing, it’s a good idea to figure out what you want from your finance. If you only need it for daily expenditures, then a credit card can be best. But if you need thousands in order to purchase new equipment, then you might want to consider a loan. It all depends on your situation as to which funding option will work for you. Whichever one you choose; you’ll be sure to get your business on the path to success right away.
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