Issuing finance to growing enterprises is an industry in itself. But before going outside in search of funds, it is better to check out your personal resources. The reason being, that personal funding is the safest method of getting money. As you are not placing any collateral here, you do not have to worry about your security getting attached in case you fail to repay the loan. Also high rates of interest won’t choke you. The flip side of using your own finances is that until you start earning profits, your personal funds get blocked.
Other Sources Of Generating Money
Now if we consider another scenario where you have a solid business plan and future growth is assured, then it is better to exploit the extra fields for acquiring money. Simply because personal means, however large, will never be sufficient for a growing enterprise and you can never hold back business plans for want of money.
Moving on to other sources, the best places to approach first are the banks. They are the oldest and most experienced institutions for lending money and considering the volatile market of money lenders, they are also the least expensive. Their interest rates are usually lesser compared to those prevalent in the market. However, the catch with them is that they are also the toughest to apply for. They insist on all the formalities being completed before sanctioning loans. These formalities include all the papers being in order like your business and personal financial statements, your tax returns in recent years, your approximate budget and your mode of repayment. Banks provide both long term and short term loans. Though in case you want a large amount of money for a longer span of time then collateral placement becomes essential. Banks also prefer forwarding funds against security like any asset or land, property etc. because then their interest remains protected.
Then secured and unsecured loans are also given by financing companies. The only difference being that within a relatively shorter span of time they approve loans charging higher rates of interest. Besides they also provide first and second mortgages, retail sales financing and credit insurance.
Venture capitalists are ideal sources of capital if you are looking for someone with really long term investment plans. These people are interested in the distant future of the company and so issue finance in return for a share in the company’s equity or stock. And since they are making huge investments so they undertake a thorough check of the corporation’s financial standing, its background, future prospects, market competition etc. before forwarding funds.
Commercial lenders are the most flexible of the lot. They have a wide range of loans and can lend you money as per your requirement. So you can choose from a higher interest rate loan with a shorter time span or a lower one with a relative longer time to pay back. Also you can ask for money to buy land, machinery, plant, furniture or to get additional working capital or to even adjust your existing debts. And if you have a good credit history then you won’t face any road blocks in getting funds.
If you go through all these easily available finance options, your business won’t stop for shortage of funds.