Looking For Ways To Finance Your Business? Consider These Factors
Sep 13, 2019 10:42
Starting a firm from scratch is no easy task. Many startup companies have the best ideas, but the challenge comes in when it is time to get money to finance their business.
The startup phases of any business require a considerable amount of funds to ensure that the company runs effectively. Fortunately, there are a plethora of funding options available in the market today some of which include, borrowing money from family and friends, getting loans, looking for angel investors, using personal savings, using retained profits and so on. However, before choosing any of the funding options, it is vital to consider the following factors;
1. Amount needed
How much money do you need? This is one of the main questions you need to ask yourself before you start seeking for any financing option. It is at this point that you also need to understand what exactly the purpose of getting the funds is. For instance, if you want to open other branches in other towns, it means that you might need more funds. As such, the amount you will need for funding is largely dependent on the purpose of the projects. It does not make sense seeking an angel investor to fund you in cases where a customer has ordered something, and you need to get stock for you to deliver. For one, you will be wasting time, yet the order might be urgent. Secondly, the investor might not take you seriously when you approach them asking for little sums of money, yet their main focus is to invest in big projects that they will be able to reap profits from.
Many risks are involved in business. All businesses have their highs and lows, more reason you have to ensure that you accurately access the risks before opting for any source of financing. Look at if you will be able to repay the loan if the business takes the wrong turn. Remember, lenders always expect you to pay up the installments as agreed. As such, ensure that before you take the money from the lender, you have a plan B on how you can pay up in case things go haywire. So much so, in cases where you choose to borrow from your friends and family, you also need to ensure that you stick to the repayment plan to avoid jeopardizing your relationships.
Sometimes, you might need money as soon as possible to for the business operations to flow seamlessly. For example, if you are an online business where you get inventory after an order has been made and need money to buy stock, you can make good use of getting instant online loans from Thinking Capital. Such loans are life saviors as you do not have to go through a long process for you to get the loan. However, keep in mind that there are limits for the amount you can receive depending on your loan eligibility.
4. Terms and conditions of the lender
Different lenders have different terms and conditions. As such, it is crucial to do your research and compare these requirements before choosing any one of them. Be sure to choose a lender whose requirements you can meet accordingly. Look at the cost of financing that the funds come with to be sure that you can be able to pay up. The interest rates and other fees are also very detrimental when deciding on the source of funding. If you are a startup company, the lenders are always very reluctant to fund your business. And most often than not, they may put very strict terms and conditions to compensate for the risk.
5. Repayment plan
How do you intend to pay up your loan? And for how long? Before you even decide on the financing option you will go for; it is vital to first think about your repayment plan. However, keep in mind that the repayment plan will go hand in hand with other aspects such as the terms and conditions of the lender. More reason you need to look at the terms before you agree on any of the options. If you feel like there are a lot of risks involved in your business, it is best if you choose a lender who has a flexible repayment plan so that you do not lose your business together with your assets due to not paying your loan in time.
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