Financing your business is often the critical component to success. There are a wide variety of ways this can be accomplished, depending upon the credit history of your business and how established it is in the market.
Finding financing for your business is just one aspect of your overall financial management of your business, but it is a critical factor for the success of many small businesses.
For those of you who are just starting out, you may want to look at a general overview of startup financing.
The hardest question to answer is what kind of capital should you seek? Often we are not aware of options available to us or don't have the time to explore what is possible. It turns out there are a vast menu of choices each with their pluses and minuses.
Using personal or family funds to finance a business is called Boot Strapping the business. Boot strapping can involve personal investment by the founders, their family and friends and/or the owners foregoing salary. It is wise for every business owner to have at least some personal funds at risk since that shows other potential investors that you are committed to the success of the business.
Another way to get funding to start a business is by participating in a Business Plan Competition. In the competitions, you present your business plan before a panel of judges who will determine the winner(s). Depending upon the particular contest, you may receive a substantial sum of money, and even if you don't win, you will get great pointers on running the business.
Business Incubation is also useful for businesses that are starting up and can't afford secretarial support and the other necessities for handling office functions. Comprehensive support for fledgling businesses in the form of reduced rent, flexible space, shared services, access to professional services and an environment of energy and entrepreneurial spirit are commonly found in business incubators.
If cash flow is your primary financial challenge, there are various ways you can make financial arrangements directly with your vendors, Bartering or you can form Strategic Partnerships in which your business partners with one or more closely allied companies, bringing valuable industry expertise, resources, and/or bargaining power to through the alliance.
For those of you looking for external financing, there are various levels available depending upon the stage of development your business is in. External funds can be raised through:
- Investors
Angel Investors
Equity Financing
Small Business Investment Companies (SBICs)
Venture Capital - Mergers
- Selling All or Part of the Business
Investigate a number of options before you make a decision. List the pros and cons of each type of funding for your business to help you make your final choice. Don't hurry the process even though it may seem urgent to get on with building your business. You are going to need to live with this decision for a long time to come. Take time to find the best long term solution that will contribute to the long term survival and success of your company.
Here are some other resources that may be helpful in funding your business:
Bad Credit Start Up Loan TipsHow do you get Financing for small business?
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