INTELLECTUAL PROPERTY
Funding a business is essential for its growth and success shortly. Many small businesses rely on a source of funding due to the burden of their bills. For a business to succeed, the company can have various channels to achieve financing.
Consequently, a business could input a community bank. The bank is more suitable for small businesses because of their first terms of permission and their better understanding of small businesses and how they fit in (Burns and Dewhurst, 2016). The process is only possible if the company provides an element of its activities that entails data on how the credit money will be utilized. The community bank is preferable as it offers the right interest amount, and the business does not need to give equity to the bank to get the loan. Although, it is commonly challenging to get a financial institution to lend money for starting due to the lack of confidence in the business.
Subsequently, the business should adopt a third party loan agreement. It is where the firm collaborates with a confidential investor to make a bank credit the investor who in turn gets capital in the business. The deal is applicable when a bank is using tight lending criteria. The third-party collaboration aids in getting a loan which the bank is cautious of making. Still, the business has to give the investor equity to get the loan.
The business can also use online funding platforms. Most of the funding sites offer vast sums of money based on short-term strain. The funding platform offer loans in exchange for an interest in future business profit. The benefit of platforms is their favour in speed as they quickly tend to accept or deny the businesses promptly due to their urge in the interest of the company. Despite the benefits, the process is expensive (Hess and Cottrell, 2016). Depending on the products of the business, the annual percentage rate can vary from low to extremely high due to the financial arrangements the company has employed. Thus, this could give the funding site much interest than the profit made by the business.
It is evident that funding a business comes with both positive and negative consequences. It also gives the funder’s interest in business success.
Reference
Burns, P., & Dewhurst, J. (Eds.). (2016). Small business and entrepreneurship. Macmillan International Higher Education.
Hess, M. F., & Cottrell Jr, J. H. (2016). Fraud risk management: A small business perspective. Business Horizons, 59(1), 13-18.