Money is one thing you will always need in business. Finance is vital for any firm, whether scaling, expanding, or staying afloat during lean periods. However, it is also something you are always short on and need additional help acquiring.
Knowing your financing options better can help you procure funds efficiently when you need them the most, especially in the case of a startup business.
Types of Financing Options
Startup Businesses can procure funds from two sources, mainly:
Internal sources:
They are your profits, stocks, assets, and reserves that you have saved over some time from your business to use later on.
External sources:
External sources are any financing options you take from outside your business. There are various external financing options. The most popular ones include:
- Banks:
Banks are among the most popular and reliable external financing options for businesses. However, they might not be the cheapest option.
Various financing options that banks offer these days include:
- Secured loans
- Unsecured loans
- Long term loans
- Short term loans
- Line of credit
2. Angel investors
Angel investors are individuals or groups of individuals who will provide capital to your business in place of convertible debts or equity. So if you don’t mind losing some of the ownership, it is a good option.
3. Venture capitalists
Venture capitalists are also like angel investors, but usually, the funds come from professionally managed firms that see potential in your business. They also need you to give up your equity against the funds.
4. Business credit cards
If you need money to pay off your day-to-day business expenses, a business credit card is a good option. Just like individual credit cards, business credit cards can be used to pay for expenses through your credit card, and you can pay the credit card bills later on.
5. Factor financing
If you are looking for some short-term cash, getting your invoices encashed early is an excellent way to do so. And that’s what factor financing is all about. In factor financing, a third party (factoring company) will pay your invoices at a discounted price to you, and they will collect the payment from your customers later on.
6. Equipment financing
This type of financing can be used to buy expensive business equipment like machinery, vehicles, and other heavy-duty things. It is pretty similar to a car loan as you get the ownership of the equipment only after you have paid off the loan, which you can do in regular installments.
These steps will ensure you easily get funds. If you are getting into a partnership or giving any stake in your company, then make it a point to check other companies’ business information reports and credit management reports. Companies like CreditQ give a detailed analysis of business from diversified sectors, and all these analyses and reports help you make informed decisions.
