Business entails the provision of goods/services to satisfy the needs of the market while earning a profit. A business could take a form of a large scale, medium or small-scale enterprise. Regardless of the kind of business, FINANCING SMALL BUSINESS resources are the most critical aspect of a business. Like fuel for a vehicle, financial resources are the fuel that keeps a business moving and to provide these finances may be an uphill task to surmount.
Means of funding small businesses abound, but the right sources deemed best for your business are very often the challenge. Therefore, funding sources for small businesses could take the form of equity financing where the business owner sells a percentage that will make the buyer a joint owner of the business. And debt financing where a business lends money to repay on a later date with interest.
These sources could take the following form:
- Business to business (B2B) lending: This is the form of financing a business where another business provides goods to a business to facilitate the sales of the products, and the repayment of the amount lent afterward.
- Family/friends: This is a sure means of funding a business through the assistance of family and friends willing to invest in your business or lend to it. Aside from the high risk involved in the family business, there is a comfort, and little or no pressure from family/friends’ funding.
To minimize the risks, ensure the terms of the funding are clearly stated and agreed to by the parties involved.
- Equipment leasing: This involves borrowing equipment to facilitate your business at a rate. A lending outfit can finance the equipment to be used by the business, and be repaid at an agreed interest rate.
- Grants: Governments, and nongovernmental organizations with programs to promote the society, boost the economy, etc. very often provide grants for individuals with business ideas to be financed by these set institutions. Grants are not necessarily repaid.
- Bank loans: A traditional business financing source where business owners seek for loans with the availability of collateral property made to the bank to grant such a loan. Loans could be on a short-term or long-term basis.
- Invoice financing: With Invoice financing, a business receives money to be paid by clients from another source in a bid to ensure seamless running the business. The money is to be reimbursed when the invoice is cleared by the client and the business owner has been paid.
- Crowdfunding campaigns: Small businesses are at the level of seeking to improve every aspect of the business. As a direct result, owners may create a bank to source for money for the business from different people. Different internet crowdfunding campaigns have tended to yield a positive response over the years. The challenge, however, is how resonating your story is.
- Peer-to-peer lending: As a business, you can seek the services of lending clubs to finance the business and be paid back at an interest rate, and on the duration agreed.
Thanks to the think thanks and technological innovations, there are more than one plausible ways of financing a small business.