Financing Your Small Business
If there were only two reasons for a company to fail, it would be poor financing and poor management or planning. We can not overemphasize the importance of funding your business. The financing company is not an activity of a time many may think. It is needed if the need arises, such as expanding modernization etc., have so when planning the importance of utmost caution and understand the use of capital. A wrong decision can haunt you for the life of your business.
Are you sure that you have to raise external funds?
For start-ups, it is understandable that you need to raise capital in the form of loans. But what about the extensions and upgrades? Make sure that external funding is a priority before applying. It is important for you to organize your finances in order transitions, but only after you ensure that you do not do it yourself, either permanently or for a while. Equally important are the risk criteria, the cost of financing and not how they contribute to the objectives and targets of the company.
FINANCING TYPES
Equity financing: Equity financing involves the sale of your shares (usually partial) in exchange for money and distribute this portion of the property and rights to profits. Equity financing can be sought from private investors or investors. This leads to access to adequate capitalization openness to foreign capital. Equity financing does not need these loans will be refunded if your partner wants to retire.
Debt financing: Debt financing is a loan against some form of guarantee for repayment. This guarantee can be guaranteed, personal guarantee or a promise. Lenders limit use of the lever to the inventory, equipment or real estate. You must correctly the debt structure and the basic rule for this is that the long-term liability of the assets and short-term loans for working capital. The reason is that fixed assets to generate cash flows during their life and have the advantage of lower interest rates, as opposed to loan capital.
Sources of funding:
You can choose depending on your personal finance situation and the desired amount.
First Family and friends: small and short-term working capital requirements can quickly be funded by yourself or with friends and family. The advantage here is the lack of interest on the part (mostly.) This collection method of finance is almost at an early stage of the economy. You should be aware, however, that disputes over money are the main reason for close relations to make acid.
2nd U. S. Small Business Administration: This is the largest source of debt financing. The SBA does not lend money directly but held by lenders and guaranteed loan and a variety of sources under one roof. Local governments, banks, private lenders, etc. make direct loans to companies licensed by the SBA. SBA loans are for commercial use different interest rates and the lowest available.
3rd Venture Capital: Raising Venture Capital Funding in place by the sale of shares whose value is equal to the financing you need. In essence, this means that the sale of part ownership and control rights. It is important that a proper assessment of the value of your business is made before the transaction is completed.
Financing a business should not be difficult provided you have configured your credentials as a good manager have collateral / property, a convincing statement of cash flows, real need, has proven good credit and a solid plan. This should not only your company from collapsing, but it has to grow and prosper.