If you are thinking about starting a new business, chances are you are looking for ways to finance your new venture; very few entrepreneurs have saved enough money to launch their businesses without outside funding. The number of choices available to entrepreneurs for business financing can be bewildering, but some of the most popular options are below:
Bank Loan
This is perhaps the most traditional route for entrepreneurs to obtain financing for their new businesses. Banks have a large source of funding available to them, even if they are less than eager to lend it out in this economic environment. However you will be hard-pressed to find a better interest rate on a business loan than from a bank. Of course, in order to get that prime interest rate, you will have to jump through a few hoops. Most banks have very strict lending standards, and they will want to see a detailed business plan that specifies your goals and profit projections. Although this is a time-consuming task, it is something you already should be doing.
Credit Cards
If you are unable to acquire a bank loan, it is always possible to finance your business with a credit card. The benefit of this approach is that it does not require approval, which greatly expedites the process. However you will pay for this speed with a very high interest rate on the borrowed money. This will put extra pressure on your business to become profitable quickly so that you can pay off the debt on your card. Generally speaking, credit cards should be considered just a short-term source of cash.
Family and Friends
Another way to finance your business may be to obtain money from family and friends through a personal loan or by selling shares of ownership in the business. Family and friends will tend to be far better partners than a bank, which may be quick to call in a loan if things go poorly at first. However tensions could easily arise if the new business eventually fails, which could lead to considerable tension within the family as everyone wonders where their money went. If you decide to go this route, it is very important that you clearly spell out the risks associated with a small business before asking for seed money.
Of course, there are many other options available to the budding entrepreneur, and you would be wise to investigate many of them. There is a lot of money available to finance new businesses, and if you have a good idea, there is a decent chance that you will be able to obtain some of that money for yourself.
Article provided by Touch Financial an online business finance service and solution company.