Obtaining funds for your project has always been a challenge when starting. This is the case when you do not have enough personal funds. Maxing out on your credit card would not be a good idea, so in today’s episode, we will be looking at ways you can get funds for a business or project you are starting.
Accessing reliable sources of capital is a task that requires insight. Developing and presenting a project that allows you to obtain from your suppliers that financial source for the take-off or expansion of your new company is something that should be considered as part of a good business plan.
This is a very usual and highly recommended option. Most banks will be willing to offer you financing for your projects as long as they are serious and are properly written and exposed. Asking for a bank loan would first require that fully document your plan since no banker is going to put its capital at risk in a project that has no potential for success. So the executive presentation of your business plan is key to getting working capital.
The advantage is that the interest they charge you can be minimal. Of course, the payment of the credit must be considered within your accounting as a liability and on this achieve a profit that allows you to grow and develop. Another advantage of this strategy is that if you maintain a good credit record with your bank, the subsequent credits that you require will be authorized more quickly, with fewer requirements and with preferential interest rates.
SME SUPPORT ORGANIZATIONS
Another excellent alternative is to go to organizations specialized in promoting the development of small and medium-sized companies. These organizations regularly have the primary purpose of promoting the growth of SMEs and therefore work investment and training programs in conjunction with governments. They usually offer sources of financing to entrepreneurs who show they have serious and long-term interesting projects. Similar to the bank credit application, you need to develop a document where the feasibility of your business project is exposed and have some guarantee such as a guarantor or property.
Another great advantage is that the interests if they exist, are quite low, which is less punishing for small entrepreneurs.
Here, the lender places a bet on the project and joins his luck with that of the entrepreneur. It is a financial instrument characterized by the participation of the financial institution in the profits of the financed company, in addition to the collection of fixed interest. That is, if the entrepreneur does well, the lender will earn more. The advantage is that it supposes financing that can be returned in comfortable installments in the difficult beginnings. The problem is that part of the benefits if they come, will go to the lender. It is useful for relatively high-risk companies.
These are entities whose objective is to take shares in the capital of companies not listed on the main stock market. They are the second source of professional financing, after banks. They are regulated. The main advantage is that they are solvent investors, with all the legal guarantees and with strong resources. But they are not very flexible. It is valid for companies that are already in operation and with strong growth potential.
This is always very limited both in amount and in the use that can be given to them. They should be seen more as an incentive than financing itself. Their main advantage is that they do not have a repayment obligation. However, it has a direct impact on the company’s working capital. In addition, they are usually slow.
Whatever sources of financing you are looking for, you must keep in mind the following points that will be seriously considered by your source of capital, whatever it may be.
- You should have complete information on the legality of your business and on the guarantees, you offer to replace the borrowed capital.
- You should have a good banking record and this includes an excellent record in the use of your credit cards.
- You must state very clearly the amount of money you require and describe in detail how it will be used and invested in the business, thus guaranteeing a return on profits.
Now it is time for you to go get some. Look up the news and ask questions about the ones available in your locality.