Handling the volatility of today’s economy can prove a challenge, especially financing a business. Especially with the market constantly changing and businesses facing stiff competition when looking for funding. While there are unsecured loans for businesses, just as there are short term loans for individuals, these can be costly and aren’t a long-term funding solution. As such, businesses seek alternative funding methods, some of which explored below in more detail:
Financing A Business With Bank Loans
While bank loans are often seen to be a long-winded process, they are still considered to be the preferred method of borrowing for business owners. Banks offer the security of borrowing from a known institution, with the choice of opting for secured or unsecured loans dependant on how much money the business may need. If a business is looking to borrow small amounts to finance a project, unsecured bank loans offer the opportunity to secure funding without requiring assets for collateral.
Secured loans, however, offer a larger sum of money for those looking to start up a business for the first time, or indulge in more substantial investments like an office move, renovation or expansion. Secured loans require a form of collateral, often in the form of the business premises or equipment, depending on what is available at the time of borrowing.
This particular method of funding is better targeted to businesses looking funding for a particular product or service. With sites like Kickstarter and GoFundMe, businesses can list details of their new products or services, encouraging users to invest ahead of production to gain the support and funds needed. In many cases, this investment is driven by encouraging pre-orders, or regular payments for smaller rewards like behind the scenes information or updates on production.
Raise Money Internally
Businesses who already have a loyal following and are seeking extra funding may be able to host fundraising events to get the money they need. These events can be anything from a fundraising dinner with shareholders or loyal customers, to concerts, quizzes, special products or sales and more. It is also possible to raise money through designated Facebook pages, which works similarly to crowdfunding by allowing users to invest money in businesses or causes they believe in.
Family and Friends
For start-ups, in particular, sourcing money from family and friends is often a useful way to cover initial costs. Those who are close by blood or friendship are more likely to help raise funds if they truly believe in the business venture. This method of fundraising is particularly useful for those with smaller businesses, such as those with only a few products available for sale or who are locally-based.
Funding or financing a business is not an easy task but is an important step to creating a successful company that will withstand market volatility and challenges. By taking the time to consider the options available, business owners can determine which fundraising option will work best for their business, and ultimately provide the funding they need.