Finance is the lifeline of a business. Many aspiring entrepreneurs have an idea for their business but lack the capital to actually start it. Finding finance in any economy can be exigent, whether for start-up’s or for capital to expand or to hold on money through the tough times. Banks cannot be the only source to rely upon. Fortunately, there are a growing number of opportunities for business’s to finance their businesses without dealing with restrictive and nonflexible banks. Here are six financing techniques for financing.
- Crowdfunding– The internet deviates the way maximum corporations do business—including business financing. With access to a substantial number of people, if the entrepreneur is able to convince just a relative few that his business or product idea is good enough, he can swiftly and relatively easily generate a lot of interest-free financing.
2. Self-financing –
Obviously, if the entrepreneur had the money, he would have used it to finance his business already. But even when the entrepreneur thinks he has the money or doesn’t want to put his savings at risk, he still has several options for self-financing:
- Credit cards– Inflated interest rates usually disregard credit cards as a workable financing decision. But there are three reasons to reconsider them: First, a budding number of low-interest credit cards are available that can give them instant access to funds at surprisingly low interest rates and annual fees; Second, if the business person pays his credit card balance each month, he pays no interest. It’s like receiving a short-term interest-free loan; Lastly, he can also claim benefits of all the “interest-free” offers will get to try a new card.
- The line of Credit– A personal line-of-credit is a good source of long-term financing at better rates than most credit cards.
- Home equity loans – It’s never prudent to put the‘home’ at peril to fund a business project. If, however, the investment is sound, leveraging ‘home’ equity can be a great way to get a huge amount of money for commercial activity.
- Whole-life insurance policies – Depending on the policy and insurance company, the business person can possibly borrow against the cash value of his whole life insurance policy.
- Government & private grants, subsidies and rebates– If the industrialist is ready for a little research and paperwork, different levels of government offer grants, loans and tax incentives for a number of commerce investments and initiatives. Many private companies also offer grants and funding for certain types of ventures, including work related to their business, industry or cause.
- Independent finance companies– Well-liked with small business owners who want the security and lending power of a financial institution without the hassle or constant pressure of a bank, independent finance companies are more customer-focused than traditional banks.
- Private investors – Finding an angel investor or venture capitalists can be an alternative, but there comes a drawback with it, that is using them will often mean giving up a share of the business in exchange for the funds.
- Factoring– A business will sometimes factor its receivable assets to meet its present and immediate cash needs. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.
One needs money to make money. A business firm requires finance to commence its operations, to continue its operations and to its expansion and growth. There must be a continuous flow of funds in and out of the business. Sound planning, efficient production and marketing are all dependent on a smooth flow of finance. Financial planning for starting a business begins with estimating the total capital required by the firm for the various need of the business.
Hence, a financial plan needs to be prepared, which indicates the financial requirements, sources for raising the funds and the application of funds.
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