There are those that have lots of ideas on mind for new endeavors but are unable to do so because of lack of funding. Obtaining proper resource for starting a new business is not everyone’s cup of tea. While most of the entrepreneurs have their own financial back up, there are many more that depend on various loans and funding to give a kick start to their business. Although, there are many sources that are willing to make investments in any business endeavor like the one you w ant to start, you will have to choose the one that suits your type of business best. Some of the main types of options of financing are listed below.
Types of financing options:
Some of the types of financing options for starting a business are listed below:
Equity Financing: Although debt funding is more common among new entrepreneurs, there remain a certain percentage of people who rely on private investors or friends and family for financial aid. These institutional investors provide financial aid exchanging it for stakes of equity ownership. This group includes close associates, “angel (private) investors” and venture capitalists. The best part about this type of loan is that it does not involve much hassle, involves less legality and contracts and can be availed very quickly. The minus points in this type of financing are that it can be availed only once and can lead to strained relations.
Debt Financing: Most of the beginners who want to start something on their own resort to financial institutions for debt financing. Depending on your liquid assets and possible collateral damages, a bank or financial institution will grant you the loan. You also have to chalk out a proper plan for business even as you learn about the ins and outs of your business. These plans work for those companies that are unable to receive funding for their equity and also do not need to give away their equity. But the problem with such financing is that the collateral may even cost you your home plus you will also have to pay the interest on the loan.
Grants: These types of funding are available through organizations like Small Business Innovation Research Program (SBIR) and other minority and regional grants like Cooperative Research and Development Agreement (CRADA). The best part about these types of funding is that the money is free and the leverage offered by grants intrigue the investors. The downside of this funding is that the definition of funding is strict and there is huge completion for obtaining such grants.
The choice is yours. While there are some small businesses that are too complicated, there are others that are too risky to decide which financial option will be best. The only way to achieve your goal is to study properly before approaching the right source for the right amount at the most appropriate time. This will definitely help you to have secured financing for starting your business.
Author’s Bio: Alisa Martin, is a regular blogger, and have been authoring articles on various finance topics for the past decade. She is a regular contributor to IdealKash.com/Neden-Biz.asp.
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