Quick-Start Guide to Financing a Business

Each year, there are a number of people who start businesses. Their ideas and business models may be different, but they will all be looking for a way to finance their plans and ideas. There are a number of common ways that you can finance your business, though some methods do come with some caveats to keep in mind. If you’re not a financial expert, but have a business plan that you want to get into place, then here are some things to consider.

Savings

One of the most straightforward and simplest ways to finance your business is to use money of your own. This can be one of the better ways to finance, as it can be safer and lower-risk in a number of ways. However, financing a business this way comes with the obvious risk that is how much you would be able to save in order to finance your business. So for a startup using a large sum of money for inventory or equipment, this could easily be out of the question. 

You could do something like refinance your mortgage which can work, but can also be risky. If the business fails, then it is likely that you could lose your home too, and could even lead to bankruptcy. You could visit www.dtss.us/debt-discharge.html for more information on debt discharge and bankruptcy, but basically, when a debt is discharged, the debtor isn’t liable for the debt any longer, and the lender is not longer allowed to collect the debt. 

Credit cards

If you are looking for an alternative way to finance your business, then credit cards could be used, as they can be a handy way to help your cash flow. They can be used to buy products to pay suppliers when you’re waiting on some money to come in. The real downside of credit cards, though, is that they are linked to your credit score. Cash advances are something that could be used instead, which many credit card companies do. They can cost a lot in interest, unless you can pay off in full quite soon. However, they are worth bearing in mind as an option.

Business loans and lines of credit

Business loans and other business lines of credit are nothing new, and can help to get a business off the ground. With a loan, the bank will give you a set amount of money that will be paid back before a set amount of time. It is all about having money to dip into should you need it, but you can pay it off at any time too. The bank will just be concerned that it will get its money back, so the approval process can be quite lengthy, and can really delve into your business plan. 

Angel investors, as described here: www.investopedia.com/terms/a/angelinvestor, are another consideration, where private individuals invest in businesses, usually resulting in them making an equity purchase. You could also get expertise and guidance from them too, a little like your own ‘Shark Tank’ investment. 

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