THE MAIN SOURCES OF BUSINESS FINANCE

Business finance exploration is one of the toughest aspect of entrepreneurship, especially for new business owners. This is as a result of the fact that there are so many sources for financing and they are confused as to which is most suitable for their business.

Before sourcing for finance as an entrepreneur, there are certain things you should put into careful considerations. Things like; how much you will need, your business plan, timeframe for repayment, cash inflow and most importantly the requirements of the source. Get more about business loan eligibility on https://www.therosecircle.org/how-good-does-your-credit-have-to-be-for-a-business-loan/

In putting the aforementioned into consideration, you are able weigh your options and make the right decision. So in this article, we are going to explore and evaluate five main sources of business finance.

  • Personal finances

This is a source from you as a business owner. It maybe your personal savings or business assets. You bear all the risk entirely. Self-funding has been found to be the easiest and quickest source of funds. Once, you have a business plan, you can move on to actualizing it. You do not need to wait for anybody to offer help.

  • Financial institutions

These are institutions that are willing to give out loans to businesses. They include; banks, credit unions, and building societies. Financial institutions help business by offering various loan options and lines of credit. These institutions have their requirements—requirements you must meet before you can be granted the loan.

THE MAIN SOURCES OF BUSINESS FINANCE

  • Private investors

Private investors are also known as business angels. They are wealthy entrepreneurs or individuals that offer funds to businesses especially new business. They usually help new businesses that their loan proposal has been disapproved by conventional professional lenders.

  • Government

The United States government usually offer help to businesses. For example, amidst the pandemic, they offered business funding options like the PPP and EIDL. Most government assistance are free and interest rates are mostly affordable. Eligibility for government grants depends on the requirements they require.

  • Venture capitalists

These are private equity investors that fund businesses with an aim of having a stake in the business’s profit. Venture capitalist fund mainly startup ventures and offer support to small businesses for expansion. Learn more about private equity investors.

  • Peer to peer lenders

This is can be done online and otherwise. It connects lenders with borrowers. it usually has a shorter repayment plan and higher interest rates depending on the lender.

  • Friends and family

Typically, our friends and family are the first people we pitch our ideas to. They may offer you money as loan or for free. Most times for free. This is also one of the easiest source for business financing. In cases of repayment, make sure you have a written agreement to avoid any sort of misunderstanding.

As you can clearly see there are a lot of sources to turn to for business finance. Small business owners need not be afraid anymore of financing options. You can even combine sources to meet your financial needs. With all the options listed above, you should be able to reach your business goals.