Business Article - Finding Money and Finance Providers
There are a wide variety of options available for getting money and financing to support your business. However, they can all be organized into the three general categories of share capital, loans and grants. Don't just assume that acquiring financing for your company is going to require selling a stake in your business or taking out a high interest loan. Take the time to research all of the possibilities and you may find that it is possible to fund your business for far less than you expected.
Grants are the easiest way to fund a business as it starts up or takes on a specific project. The government provides grants to business owners in certain categories. If you are disadvantaged in some way, you may be able to qualify for a program that helps people like you start their own businesses with government money. Charities and other support organizations may also have either grants or very low interest loan programs with favorable repayment plans. These may be subsidized entirely or in part by the government. The most obvious advantage of getting a grant for your business is, of course, that you don't have to pay anything. The money is yours - and there are plenty of programs that can help you if you are engaging in work or product development activities which will help aid a disadvantaged social group. The downside is that grants can be difficult to find if there isn't an obvious way for you to qualify. Still, check with a consultant on grants to see if there are local grants available for encouraging small business owners. If you are starting a new business, a grant is unlikely to pay everything that you need to get your new company off of the ground, but it can provide part of your funding and reduce your overall startup costs, making it more likely that you will be able to succeed. A grant usually has to be spent only on very specific things, so after you have received the money you should be able to provide a full accounting of every transaction that the money was involved in. Be responsible with your tracking of what money is used for what! Another source of money that typically doesn't require any form of repayment is awards, which may be given out by local trade organizations. However, these obviously aren't regular enough for you to rely on them.
Many businesses get started with loans, which are provided by local banks. Business loans tend to be easy for many companies because they allow you to get the money that you need without giving up control of a part of your company, as you generally do when you bring in outside investors. Another advantage of getting a business loan from a bank is that the repayment schedule is usually made easy, with a system of payments where you can start out small and increase your payment level as time goes on (once your business has gotten underway and started to turn a profit). Business loans have a long and well established legal history and are regulated by the Financial Services Authority, so there is a high level of reliability, and of course it is easy to find banks with the money for business loans in any part of the country. Customer service at banks for small businesses is another one of the benefits, and modern banks usually have internet access to your account so you can keep track of your purchases and sales, your withdrawals and deposit history, at any time of the day or night. Banks also provide a range of comfortable debt financing options that you can use to adapt your payments depending on how quickly your business is able to reach a profit making status, and the interest payments which a company makes on a loan are tax deductible, which helps you to save money when you use loans to finance the growth of your business rather than using the money from your profits directly.
The most obvious negative aspect of a loan is that you have to pay the interest, so it costs more over the long term, and the longer your period of repayment is the greater the difference will be between the original loan amount and what you end up paying. Banks also sometimes require some form of collateral on a loan. For some people starting out with a new business, that means providing the mortgage to their house as collateral, which is a risky move - if you are unable to pay back the money on the loan, you may find yourself losing your house to the bank. Banks also tend not to make loans to people who have the greatest amount of need; they like to give loans to people who are financially stable without the loan, and will be more likely to pay them back reliably. Finally, the guarantees that you have to make to the bank in order to get the loan, and the consequences of having to make changes to your repayment schedule, could affect your credit rating. All in all, however, a bank loan is one of the most flexible and handy ways to finance a growing business.
For companies which need additional funding beyond that which a bank loan can provide, or which are aiming at growing very quickly and / or making an IPO in a couple years, venture capital may be the answer to come up with some or all of the money which is needed. Venture capital funds can provide your business with hundreds of thousands of dollars. The process of obtaining venture capital money requires that you spend time finding the best way to present your business to investors. Investors want to put their money into a business that will be able to give them an exit within three to seven years. They also like a sure thing - so if your business is unable to live up to its promises at the time scheduled for the investors' exit, they may want an option to take their value through the forced sale of additional stock or the business may have to be cannibalized. In some cases investors don't want to be very involved in the running of the company and are satisfied as long as they can make their profit on time. Other investors may want to work closely with you to help you develop ties to their contacts within your industry, and may even stay on after the exit period if the company is doing well and the value of their stock is continuing to ascend. Angel investors are one popular source of venture capital - these are generally older people who have become independently wealthy working in the same field as your company. With their industry connections and experience they can help you chart a course for your business and their recognition of your ability to manage your company can help you to form stronger partnerships with other companies. Individual angel investors tend to be able to invest anywhere from twenty thousand to one hundred thousand in a business, so you may need multiple angel investors depending on how large your business needs to be or how much cash it requires to get started. As long as you are able to put together a strong relationship with your angel investor, this can be one of the more comfortable ways to fund your business. Sometimes angel investors invest in groups, which can give them the same kind of spending power as venture capital funds, but these groups can be easier to persuade of your company's value. The one thing to remember with venture capital is that usually it is available for businesses that are already working - companies that have established a successful business model and shown that they have existing strong revenue streams. This means that if you are just starting a new company, you may not be able to get venture capital unless you have a track record in the industry and a specific product, technology, or other advantage that could attract investors' attention.
Between these possibilities: grants, loans and venture capital, you should be able to find a combination of funding sources which will help you get your new business off the ground, or take your existing business to the next level. Whatever sources of money you decide upon be sure to compare all of the options that are available and consider how the pros and cons of each one could affect the way that you do business. Whether you only need a couple thousand dollars in the form of a specialized grant, or whether you need hundreds of thousands of dollars from a venture capital fund or a group of angel investors, take the time during your early planning stage to come up with a solution that suits your needs and make sure that you understand and are able to handle whatever methods of repayment are required. Good luck finding money and financing options to help you with your business!