5 Financing Options for Businesses to Quick Cash
Starting a business right from scratch and getting it off the ground isn’t easy. Many people venture into business but end up closing within their first few years of operation. Many factors have been linked to startup failure, but financing is the main challenge. Finding enough money to support business functions and cover company expenses has never been easy for startups. This guide explains five of the best financing options you can use to kick start your business if you’re not sure how to finance your idea.
Personal Finance
Personal finance is probably the easiest way to finance your business. It involves using your own savings to start and grow a business. Using savings is the safest and most conservative method to fund your business. However, the main challenge with this method is that you’re limited with the amount of money you can raise. For this reason, some business owners decide to use their retirement plans, their homes, and insurance policies to finance their business. While this may work, it is not a wise move because if the company fails, you stay a chance of losing your property.
Take a Personal Loan
If you’re looking for fast business loans, a personal loan should be at the top of your list. Personal loans are usually easy to apply and qualify, unlike auto loans. This makes them perfect for your business expenses. Once you are eligible for the loan, you receive your funds in a lump sum, which you’ll repay in monthly installments for a specified period. The best thing about personal loans is that they are not limited to the purpose. This means that they are versatile and be used for any reason, including funding your business. Personal loans also charge decent interest rates, thus making it the best loan to finance your business.
Credit Cards
Besides personal loans, credit cards can also be a great way to fund and grow your business. Credits are versatile and can be used to pay for business expenses such as paying suppliers and, in turn earn discounts and other perks. Ideally, credit cards can help expand your business capital and minimize financial challenges. However, credit cards are closely tied with your credit score and if not well utilized, it can negatively affect your score. Additionally, some credit card service providers implement limits on their cash advance programs thus increasing interest rates.
Friends and Family
Family funding is a common practice among many startup entrepreneurs. You can request your family and friends to invest in your business. You can do this by either asking them for a loan or selling them apart of your business. Many people have grown their businesses through family equity investments while others have failed. This brings us to the downside of using family and friends funding method.
One of the disadvantages is that in a business failure event, you risk losing your important relationships. Money matters are sensitive and people tend to be touchy when dealing with possibility of risking their money, so you’ll need to weigh your options and make a wise decision. Another disadvantage of using family and friends is that you’re likely to run your business as partnership even it was not your plan. Once their money is at stake, they may even want to take part in the decision making process.
Angel Investors
Angel investors can also help kick start and grow your business. Typically, these are private small group or individuals who invest in businesses through equity investments. The investors can provide funds, guidance and expertise to start and expand your business. However, it is not easy to get an angel investor because for them to invest in your business, they need to see a convincing business plan and a viable progress.
Similarly, you need to craft a reasonable exit plan that allows the angel investor to recover their money and obtain their profits. While angel investors can be the best option to equip you with the necessary skills and funds to grow your business, it can help if you kept an attorney to take you through the process of equity investments.
There are several financing options your business can get quick cash. However, they all have their own advantages and disadvantages. Read the above mentioned method and choose the best for your business.