A business needs to be financed for it to thrive. For new businesses, funding the business using its profits can be quite difficult. Most times, external funding is needed. You can get funding from different angles: commercial banks, loan companies, investors, etc. Among these options, banks, and loan companies are the common financiers, but should you get funding from them?
Borrow money from banks or loan companies only if you can pay back within the speculated time
Businesses borrow money with the intent of scaling their activities and maximizing their profits. Even though banks and loan companies are more accessible and available than the other sources business could get financing from, they have stringent rules sometimes. For instance, the interest rates on the money borrowed are usually high, and may even cripple a business if the owner is not careful. Some loan companies and banks are especially exploitative. Besides that, businesses may not be able to return the loan before the time given expands. As such, many businesses have their collateral ceased and they end up worse than they started. You should only get a loan from banks or loan companies to finance your business if you are sure you will be able to pay it back before the given period elapses. If you want to take a loan from a loan company, you should consider patronizing MaxLend. If, on the other hand, you want to get loan from a bank, you can consider patronizing Axos Bank.
However, there are better options than banks and loan companies that you can try. Here are some:
Crowdfund your business
Here, you try as much as you can to get many people to fund your business. You can use crowdfunding platforms to create the awareness needed and get the money you need. Technology is a more efficient tool when it comes to crowdfunding, but if you are not comfortable with it, you can bypass online crowdfunding. You can decide to do it manually by getting your friends and your family to contribute to your cause and also help you promote it. People who support your businesses do not get anything in return in crowdfunding, but you are under a moral obligation to give back to society.
Use your funds or partner with others
You can use your funds to finance your business before the business starts paying you. you can strategize how to get money for the business idea you have. For instance, it may require you to work extra hours and months at your job, taking on more jobs, etc. You may need to use your savings or sell some of your valuables, especially if you are not financially buoyant enough. Additionally, you can try taking on some people who are worthy of being your business partners. If you would be financing the business with your funds, you alone will have all the profits. If you are opting for the second option, you need to give each person a share of the profits based on how much they have invested. Remember that none of these options is nobler than the other, it all depends on your capacity.
Build an efficient supply chain and customer base
Another way to get your business financed is to build an efficient supply chain or a customer base. This can either be done in two ways. You can meet with the suppliers of the products you intend to sell and reach an agreement to give you on the condition that you will pay back after-sales. You sell the products and then pay the suppliers. You do this until you have gathered enough capital to start the business properly. The other option is to look for customers who are ready to pay you upfront for the products you provide. Once they pay, you use the money to get the products, sell them, and make a profit.
Grants and awards
There are both public and private awards; these are also sources of funding for your business. To apply for grants and awards, you have to ensure your business is registered and legalized. You can search for awards online. However, awards and grants demand certain criteria for your business, so you have to meet it if you want to be a beneficiary. You need to ensure your business has made progress and such progress is documented. You also need to have a digital footprint in case the organizers need to look for you online.
Whichever source of financing you choose for your business, ensure it is in your best interests. Depending on the type of financing you get and how you manage it, your business either thrives or dies.