Financing options
Access to capital is most often the most important thing that determines whether a newly born enterprise would succeed or die in its infancy. This is why it is often said that money is the mothers milk for any business setup. When it comes to financing options that are available there are many available.
Angel investors and venture capital
For early stage financing the best option available would be Angel investors. These people are those who will be willing to take that extra bit of risk the banks usually will not take. Another good thing about angels is that they will invest even in those enterprises which will not fetch enough profit for the venture capitalists. The angels invest with a long-term plan unlike most other investors. The venture capitalists on the other hand invest in high growth industries that have tremendous potential for returns. They also have very strict investment criteria as they are aiming at producing profits in relatively short span of three to five years. Another thing to keep in mind is that when you accept an investment from a venture capitalist the owner potentially loses independence over the company as the capitalists will have a very strong hold on the board of the company.
Commercial banks Another attractive industry from where one can acquire financial help is from a bank. Since the banks do not require the businessmen to turn over equity, taking financial help from them is a very common option. But the banks are very selective about approving loan sanctions. New companies or people having almost no operating history and no collateral will not be given a loan by most of the banks.
Small business administration
An SBA loan guarantee is something that guarantees or almost does the getting of a bank loan for you or your company. The federal agency itself will not loan the money, but it guarantees 75 percent of the single loans made by individual lenders up to a figure of $750,000. But for attaining such a guarantee one must first show that they cannot get any conventional financing at fair terms.
Home equity loans These are cost effective alternate options to other types of loans as they offer very attractive interest rates. But then it would not always be a very good idea to keep your house on the line to start your business venture. So giving a good thought before taking up this option is very essential.
Credit cards
This is a very quick and easy way to gain access to money. But this cannot be used as a long-term financing method because it can turn out to be very expensive. This is because the interest rates associated with credit cards are very high as compared to the interest rates of other loans.
Equipment leasing
This serves as the main option for a lot of cash starved businesses. What it does is that it gives you access to a lot of equipment which are very necessary for running a business at very cheap rates. The equipment could be anything like computers, cars, fax machines etc.
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