Are you planning to build your own company, but hesitant to do so due to lack of funding? Do not know where to get funding for your business? If so, then, this article is for you. Read on to gain tips on how to get the needed capital for your business.
With the onset of recession and with the strict policies that most financial institutions have, it is difficult for you to obtain the needed capital to start-up your proposed company.
Not all business enterprises can survive without venture capital (VC) or seed capital. You need this type of capital to keep the company running, to finance product innovations, expansions and research developments. There are numerous sources of seed capital for your business, but before choosing one, you must weigh in their advantages and disadvantages.
With seed capital, you do not need to pay back the company’s investors if the firm goes insolvent or bankrupt.
You do not need to pledge the business properties as collateral when you need to obtain a loan or equity
With sufficient seed capital, you look better to investors and lenders
You have more cash available and does not need to make debt payments.
You need to transfer share and ownership of company profits to other investors.
Other business owners or stakeholders may have different ideas on how the company should be managed and run.
Payments made to investors in corporation type of business are not tax-deductible.
Not at all times that stakeholders need to raise this type of capital, but there are scenarios in companies that you must consider before deciding to raise the said funding like:
You can raise VC if you are working with a prototype and need additional funding for the completion of the project or to construct a manufacturing facility.
You need additional VC if you are planning to expand your company due to the growing demand of your product or services. You need additional capital to hire additional employees to increase your production and to manage your branch offices in other territories.
You need more funding if you intend to acquire your rival companies.
Sources of VC:
Credit cards – it can be an ideal source of additional capital if considered wisely because if you failed to pay your amortization on time, then, you are at risk of rising interest rates.
Supply chain financing – your supplier, manufacturer or distributor can also issue the needed loan or line-of-credit.
Small business administration (SBA) microloans – it is a small and short-term loans usually used to finance equipment and supplies purchases.
Grants – is one of the difficult funding to obtain because these are usually given by state or local government.
Personal savings – your own personal money. By using your personal savings, you can own 100% of the firm’s equity. It is considered the most ideal source of financing because you are only liable to yourself.
Friends or family members – you can also consider borrowing money from family members of friends. It is also considered an ideal source of funding next to personal saving because you can have favorable terms and conditions.