Entrepreneurship is a task with many challenges because it is not easy to create your unique identity in a market that is highly saturated with a variety of promising ideas. Another most difficult and important task is to obtain the necessary resources for each stage of the business, from opening to expanding operations. So, for a successful business one needs to know what are the available options when an external capital injection is needed? When you need to grow your business following are the many options that will help you in providing finances.
THE CAPITAL REQUIREMENTS PLAN
As a rule, your savings are not sufficient to finance your business start-up and if you consider the main rule of the business you should avoid investing all in the venture. Freelancers or small business owners have to invest little in real estate financing, machinery or employees to set the business and get it running. However, the main question is what amount do they need to start the set-up? When it is decided you can get help from franchise or license systems that enable the establishment of partner companies with minimal start-up investments.
Further, while creating the budget many founders overlook to secure their living costs in the start-up phase which causes them problems when the business pace goes up. Thus, when entrepreneurs seek the help of a merchant cash advance company who will provide capital investment arrangements and provides fundings for your business – they should consider and calculate every aspect of the trade for final estimated figures.
Thus, before starting a business one should ask a question about how much finance has to be set aside in preparation for starting a successful business? The preparation costs include, for example, registration fees, approval costs, consultant and notary fees. Founders in a franchise system can use the information and experience of the franchisor and other network partners.
FAMILY AND FRIENDS
They can be the first option to get the resources as it is easier to negotiate and have an interest in supporting their own. Asking for loans with friends and family is a common practice and can be the starting point. In many cases, the person who supports you in financing takes a lot of risks. Therefore, the entrepreneur must offer the same level of openness and commitment that he would give to any financial institution by presenting the project, explain how the money will be used and make an agreement on the method of re-payment.
It is also important to emphasize that the friend or relative is entitled to charge market recommended interest as they are acting as official and legal investors. We must carry out the formalities stipulated by law for this type of agreement between persons. Also, everything must be in writing to avoid conflicts and misunderstandings in the future.
BANK IN FINANCIAL CREDIT
A loan granted by a bank or a financial one is one of the first ideas that come when thinking about dependable financing sources. However, it is not always the best option for entrepreneurs.
First, you have to go through rigorous credit analysis and investigation of credit history. If you have a past record your ability to pay the credit is thoroughly analyzed. If there is another person involved, their records will also be evaluated. In many cases, it is necessary to present a guarantee, which may be a property requiring the signature of a joint partner or of several obligors. In addition to the above, the interest rate can make this an unfeasible option.
On the other hand, for those who meet the selection criteria, this is an interesting solution, especially for those who already have a history with a bank. Having a bank POS can be useful since some banks take into account sales in their credit analysis. This may be the only alternative if a large amount is needed.
If you have a very innovative and technological business idea, an option for you can be to seek financing through investment funds or venture capital. These are the entities, which you can sometimes find through banks as they collectively and discretely invest large amounts of money to people who have a promising business idea that can have a positive impact on the market.
Similarly, there is a type of business venture that comprises of the business angels which, unlike investment funds, are a series of private investors. They decide to invest their money in companies in their launching phase but usually with a much smaller capital than a venture capital association could invest. Usually, these people have some experience in the sector in which they have decided to invest.
Besides, in an attempt to encourage investment at the national level everyone needs to consider and include the process of taxation in their funds as a Law entered into force where it says that the Income Tax for Individuals (Income Tax) can be deducted up to 20% of the amount invested. Government resources are a good option, but be prepared for the paperwork.
GOVERNMENT PROJECTS AND PROGRAMS
Depending on your type of business, it is possible to obtain financing through government programs. There are programs, for example, ICO loans.
RESEARCH AND DEVELOPMENT FUNDS
Businesses dedicated to scientific and technological development may be able to receive support from federal agency programs. Such as the Chamber of Commerce that provides support and funds for companies in this area. Research for the funds is the most important thing to consider. Getting a loan is a liability for you therefore you must take this step carefully.
For new companies, it is advisable to enter an incubator program available through a wide variety of programs nationwide. Still, this does not guarantee that any financing is authorized, but it will benefit by obtaining valuable information and contacts for the business.
Microcredit is a loan for a relatively small amount aimed primarily at people who want to start a small business or self-employment. They can develop productive and independent activities that include an agricultural project, an artisanal business, or sells some products. These financings reach remote communities where there are simply no financial bodies.
There are two types of microcredits:
The individual microcredit consists of a scheme similar to bank loans. It is a financing process that is granted to a person and it is often necessary to have a guarantee or collateral guarantee. Microcredit in a group is aimed at people who have no guarantees of their own, here people form groups of five or more who are living in the same community.
SALES HISTORY THROUGH POS
A POS can be of great help when applying for a bank loan with the same bank that provides this service. Along with reliability, it is one of the reasons why an entrepreneur could prefer a bank terminal over other options. The seniority of a customer, transactional and sales recorded through POS are few of the variables considered during the credit analysis. Since the volume of sales influences the ability to pay a loan. Some banks have credit products and services specifically designed for their POS customers.
Capital is needed to establish most companies. However, with extensive borrowing, the entrepreneur enters into liabilities. You cannot asses the risks without precise capital requirements planning. If the money runs out in the start-up phase, it will become a complicated time for you as there will be a risk of closing the business. The funding banks are also a waving option because people can only apply for the loans if they have an established foundation with no time constraints as they do not provide loans for any emergency.