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7 Ideal Ways to Get Small-Medium Businesses Funded

Many people dream of establishing themselves by setting up their businesses, but lack of funds is one of the major reasons why people are unable to give birth to their exotic business ideas. Many businesses fail on their road to success because of insufficient funds.

You might have the finest business plan ready with you, but you’ll run out of funds at some point in time. You could be spoiled for choices when it comes to financing a business. You need to look for the options, which are easily acquirable.

To all those people who are looking to fund their businesses. Here are 7 ideal ways to get small-medium businesses funded.

1.    Bank loans

Bank loans are considered to be the most convenient form of loans. If anyone wants to seek funds, it is the first option that comes to their mind.

If you’re thinking to opt for a bank loan, you would have to schedule a meeting with the bank. In this meeting, you would explain your business niche, operations, and the offered interest rates. Not all banks are willing to lend out to small businesses because they don’t have a great credit score. To acquire a bank loan, it is essential that you have a ‘well-built credit score’.

Once your deal is settled for the loan, it would be advisable to adjust the interest rates. High-interest payments can harm your financial statements.

The share of bank loans by small businesses has decreased over the years. The reason is the outstanding loan balances. It is very unlikely that a small business can survive with high-interest payments on loans. Many businesses seek a bank loan because they aren’t aware of the other funding options available to them.

2.    Venture Capital

Venture capital is gaining recognition because it has helped many new and small-medium sized businesses in acquiring funds.

The venture capitalists are seeking small businesses that have the potential to ‘prosper and grow’ rapidly. They are willing to offer funds to your business if they see some capability, but that doesn’t come for free. In exchange for their funds, they seek ownership in your business usually in the form of stocks. If you’re opting for getting funds through venture capital, then you need to consider a few things.

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•    Venture capital firms would be a part of the decision-making process.

•    They would have access to all financial information of your business.

•    They would acquire preferred stocks – meaning fixed ‘dividend’.

If this sounds reasonable to you and you’re willing to share your business, then there couldn’t be an any better option than venture capital.

 The annual funds raised through venture capital are the highest compared to the rest of the options. Since there is no repayment or interest, people are willing to get funded through venture capitals. Today, several well-established businesses were funded by venture capitalists. To name it, the biggest one is Netscape communications.

3.    Crowdfunding

Crowdfunding is a practice of gathering a small number of funds from many people. This may sound very impractical to you but $738.9 billion have been raised by small businesses in 2016 through crowdfunding.

You don’t have to travel from house to house and tell people about your business to get funds. Many websites allow you to campaign for your business. But, you have to offer something in return on investment which the people are making. It could be a share in profits or some rewards. The reward you’ll be offering would depend on the funds being donated. The more the funds the better the rewards are likely to be.

All you need to do is to make your venture look appealing to the viewers. Come up with something unique, so it persuades people to invest in your business. The more tempting your business set-up looks the more funds you’ll be able to generate.

With crowdfunding, you won’t be charged with any interest payments nor will you have to pay back the money.

4.    Personal Financing

Most of the entrepreneur’s start-up their businesses through personal financing. In the development stage, it is very difficult for a business to repay loans with interest payments. This makes personal financing an ideal option.

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Personal financing is the optimal option even when you need funds for your established small-medium sized business. Using the money available to you is a lot more feasible than acquiring a loan. Personal financing eliminates any interest payments which automatically reduces expenses for your business.

You can use the money available in your savings account or your foreign currency reserves. If you lack savings, then you don’t have a choice rather than acquiring SMB loans.

5.    SBA Loans

Small businesses administration loans could be your optimal choice to acquire funds for your small-medium sized business.

When you’re running a small-medium sized business, it is not possible to have an exceptional credit score and a stable market position. Due to which it becomes very challenging to acquire a bank loan. Banks think they are sailing a boat that has high chances of sinking into the sea.

SBA can guarantee your loans to a bank – which increases the chances that you’ll be able to acquire a loan. But before this, you need to qualify yourself for an SBA loan. Your delightful borrowing history can make your way to acquiring an SBA loan.

There are a few things which you need to understand with these loans.

  • Funding through these loans takes time. It’s not something which would lend you money overnight. It would take a few weeks or even a month
  • You’re required to have a reputable credit score to acquire SBA loans.
  • Documentation is necessary.

If you think you’ve all what it requires, you can take a step ahead to attain these loans because they offer the most expedient interest rates.

An existing business has higher chances of getting SBA loans as compared to a startup. If you have an established-existing small-medium sized business then guess, you’re the right fit for these loans.

6.    Credit Cards

Credit cards are one of the greatest sources of funding of available. It doesn’t insist you to spend all amount borrowed instead there’s a credit limit. You can use the funds as much you wish to because you’ll only repay the money which you have spent.

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Sometimes, you don’t need a million dollars for your business but some small funds to continue with your business operations. Such as, to pay for daily expenses or for some raw material purchases. This is not the time when you would want to seek a bank loan. You can rather look for credit cards.

There are a couple of credit cards specifically designed for the funding of small businesses.  Make sure to use your business credit card rather than personal credit card for funding.

As per these statistics, credit cards are being used over consumer and real estate loans. The main reason is that credit cards offer greater value and feasible funding than other available options. Unlike real estate loans credit cards eliminate the need for collateral.

However, there would be some amount of interest charged on the amount you’ve spent. The rate would depend on your past records and credit score.

7.      Angel investors

Just like the name suggests ‘Angel Investors’ are people who are willingly looking to help out small businesses. Angel investors are wealthy individuals usually elderly people seeking investment opportunities.

These angels won’t just come and give you funds. They expect a ‘financial reward’ in return for the investment they have made. Alongside, the investor would be eager to take a dig into your financial statements and future business plans. The investor would be willing to know your business’s current position and where is it likely to stand after a few years before making any investment.

Investors want to be sure about the stability of a business. Some may act like silent ‘business partners’ but you can be fair about what you have to offer. Here are some points which you can discuss before the angel makes an investment.

  • Will they be part of the decision-making process?
  • How often they would like to know about the company’s progress?

It appears that angel investors have increased rapidly. As per the statistics, there has been a 40 percent growth in the angel organizations which makes it an ideal source of funding.

Higher chances of growth can help you find an angel investor instantly. These angel investors don’t just bring funds into your business, but also a lot of expertise. Such things can help your business learn and grow rapidly.

Wrap Up

Running short of funds could be very stressing for any business owner. In such times, it is important to hit on suitable funding opportunities for your business. You may find it strenuous to acquire funds for your small-medium sized business because you haven’t established yourself in the industry yet. But there funding opportunities awaiting your attention. You can look into these 7 ideal ways to get small-medium businesses funded.

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