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Even if you come up with a brilliant small business idea, it may still be difficult to find the right funding option. There are many business financing possibilities but some of them are connected to hidden dangers and unfavorable conditions.
Choosing the best funding option for your small business will depend on several factors. Here is a list of the different possibilities and of the specifics to keep in mind.
What’s the Condition of Your Saving Account?
Your own financial resources should be invested in the development of a small business.
This type of investment has the potential to guarantee tremendous returns. Additionally, you will avoid high interest rates and accumulating debt before the company has even started to grow.
Unfortunately, many people possess limited financial resources, which make the realization of business plans exceptionally challenging. Figure out whether you can depend on your savings and on the assistance of family members. You should be capable of financing at least a part of the project.
Bank Loans – Good or Bad?
Many small businesses depend on bank loans for their funding. This is the most easily available option and the trickiest one to deal with. The bank loan comes with an interest rate and with a specific repayment period. Failing to comply with those conditions will result in the accumulation of debt.
Each financial institution has specific loan conditions. Some banks offer small businesses more favorable loan offers than others. Always do research and shop around before choosing the loan for your business.
Angel Investors: Can You Really Find One?
The angel investor is one of the most important individuals for a small company. Angel investors are successful entrepreneurs that are willing to provide funding for good business ideas.
The process of finding and attracting an angel investor could be lengthy and challenging. These individuals are approached by dozens of small business owners. They have the experience and the knowledge to recognize great ideas and professional presentations. You will have to work really hard, in order to get this kind of small business investment.
The manner in which you present the idea and your commitment will be determining for the attraction of an angel investor. You have to put your heart and soul into the business presentation. Keep in mind that angel investors are successful entrepreneurs and they will provide funding solely for the projects that they consider profitable.
Several Additional Small Business Funding Tips
Funds could become available in several additional ways.
Consider selling all of the office furniture and the equipment that you no longer need. Though the amounts will be relatively small, they can help you finance some profitable activities.
Many companies organize donation and fundraising campaigns, as well. These events can be a great success or a complete fiasco. People will be willing to support a fresh business idea, as long as you convince them about it. Proper business presentation and letting individuals know how your company will contribute to society is going to increase your chances of fundraising success.
Investment Fraud: Be Careful about It!
Be careful about small business investment options that appear to be too good to be true. There are various investment fraud schemes and you have to remain alert.
Always go through the conditions carefully. Options that have very low interest rates or a guaranteed return of investment should be avoided. You should also maintain a healthy amount of skepticism about unsolicited investment offers that you learn about via mail or social networks.
Whenever in doubt, rely on the assistance of professionals. Forensic accountants can keep your financial wellbeing intact. These professionals carry out investigations of different fraud schemes and they can help you prevent fraud of funding.
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May 4, 2013
Remember, every business will have different reasons for sourcing finance and every funding proposal will have its own unique features. Therefore, you should seek professional advice from your accountant or business adviser before making a financial decision.