Small business entrepreneurs often find it difficult to raise capital to finance their new business. According to the London Society of Chartered Accountants, Susan Field, one in every three businesses closed in the first three years of arrangements due to lack of funds. However, new businesses can ensure security if they are able to secure enough finances to see them through these important years.
Here are some tips to help you finance your new business.
When you buy a new business
Personal Finance: Dip into your savings, get a mortgage at home, sell your personal assets or apply a guaranteed bank loan. This is the safest way to raise finance because it ensures total freedom and flexibility for business owners. In this way, you don’t depend on the mercy of your investor.
Loans from friends or family: If you can get a loan from your family or friend, you can enjoy better requirements than those provided by banks or professional loan institutions. However, asking for loans from friends and family can test existing relationships.
Bank loans: Overding or bank loans are one of the most common ways to improve finances for new businesses. But bank loans do not offer any flexibility because you have to pay interest on the funds you attract whether you use funds or not. In case of overliness, you need to pay interest only on the part you have attracted.
Small company loan guarantee scheme: in terms of business that has an annual turnover of less than £ 3 million, the government acts as a loan guarantor (up to 75% of the loan amount). Two years after utilizing loans, bank loan guarantees can be extended to £ 250,000, if needed. In return, the government imposes a 2% premium business in extraordinary quantities.
Investors from outside: You can collect money from investors by issuing stocks. The advantage is that you need to pay your investors only when business is able to make a payment. The inherent risk is that investors can try to control running a new business.
When new businesses grow
After you in business, you still need to finance to fulfill your business commitment. Partnerships or limited companies that sell goods or services can take advantage of invoice discounts are decent options. Factoring is a similar practice in which factors will collect money directly from circulating bills with customers. In these two ways, you can easily get a down payment at 80-90% of the invoice value.
Finance assets are another option to finance new businesses that have just begun to develop. However, only assets that have a predetermined value can make money. It is possible to get equity finance for businesses that develop through the angel business and venture capitalists.
The right financing is the source of new business life. Business owners must plan their financing first to ensure regular funds.