What Are the Best Financing Options for Your Firm?

Your business is your livelihood, and so keeping it up and running is likely to be your top priority, especially if it is in its start up or early phases. Very few business owners fund their venture entirely on their own, with many opting to take out a bank loan or even a credit card. These can be costly, however, so here are some alternatives which could prove to be effective.

Crowdfunding

Having enjoyed an increasing amount of popularity in recent years, crowdfunding is an effective option for entrepreneurs who are just starting a business or have a solid plan for creating one. Still a relatively new concept in the field of alternative finance. Its reckon to be worth $34.4 Billion. It involves using one of the various crowdfunding websites, such as Kickstarter, to pitch an idea to potential investors (the general public), who will contribute towards your idea if they like it. That way too they own and have contributed a small partnership of that business.

To be successful, your idea will need to be popular and easily understandable, so it is worth doing some research to learn some of the most effective ways to present your plan. Some top tips from crowd founding experts include prepare, prepare and prepare. Know your crowd, capture the imagination, get your facts right and choose the right platform

Invoice Discounting

One of the most effective methods of financing a business is through invoice finance methods such as invoice discounting. This involves bypassing the lengthy payment waiting times associated with invoicing customers for payment, and is done through a third party, or lender.

The lender will pay you a large percentage of the invoice’s value upfront, deduct their small fee, then pay the rest of the money once the customer has paid in full. This provides an instant cash injection to your business and ensures that cash flow is not hurt by invoice payment delays, making it an incredibly popular option amongst those who invoice their customers.

Angel Investment

One final popular form of financing comes in the form of angel investment. It involves seeking out an investor or group of investors who will invest their own money in return for a stake in your business.

Finding a wealthy individual or individuals who are willing to invest in your business may sound like a tricky task, but there are now numerous websites which allow you to present your idea online to a group of potential investors. An added advantage of using this form of financing is that angel investors usually have a wealth of business experience which you can tap into.

These are some of the methods you should consider for effective financing of your business. There are many more, though, so research is the best way to determine which may be of most use to your business.

Venture capitalists

Venture capital is money that is given to help build new start-ups that are considered to have a high growth and a high risk potential. Generally as venture capitalists focus primarily on specific industries means they can offer advice to entrepreneurs, if they think the product/service will be a success or what they need to do to bring their product/service to the public market. The downside of using a venture capitalist is that they generally look to get their investment back within three to five years.

Grants

These are extremely hard to obtain and it tends to favour businesses that are focused on science or research if eligible the grant comes direct from the government. Recipients of these grants must meet federal research and development goals as well be highly successful  when they come to market.

Online lending

Online lenders have become a more popular and widely known method to the traditional bank/business loan. The advantage being speed, as the decision and accompanying funds can be issued and received within days.

Microloans

These are small business loans that are usually lent for up to $35000. Generally used for start-up business or, to newly launched business for working capital. Its’s typically a short term loan with less cash being lent to start with. These loans are generally used for the purchase of equipment, inventory, machinery, supplies furniture etc. The downside being lenders will want to know the exact ins and outs of what you plan to do with the loan and can place tight restrictions on what you can and can’t use the money for.

About the Author

Denny
Hello, I'm Denny Farhan. Interested on Tech, Business, Social media, Internet marketing, and Web development.

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