Saturday, July 17, 2010

How to Finance your Business

Do you want to start a business but can not proceed because of proper funding? Hopefully, this post could help. There are numerous ways to fund your business. Even if you do not have the proper funding at this time, you can still start with your business. Here are the options available for you.
Apply for a loan. Depending on your location, there are companies who can provide you the revolving capital you will be needing to start with your venture. It will take some time and paperwork, but with patience you will be able to pull it through. There are a list of organizations who could give you the loan you need;
  • Business Lending Institution. These type of lending organization can cater even medium business organization. The requirement for these lending organization is your business plan. Proper documentation is very important in order to get your loan approved. If you are in the Philippines, there are cooperative organization that could actually lend a helping hand. In fact, it gives the necessary loan even for small business. 
  •  Bank Loan. Bank is one of the big institutions that could help you finance your business. However, you will be needing a collateral in order to get your loan approved. The authenticity of your collateral will be scrutinized. The documentation of the property will be thoroughly inspected. Your monthly income should be declared as well. Note that there is a corresponding interest once your loan is approved. It is mandatory that payment is constant once the payment period starts. Failure to do so would mean losing the property that is pledged to the bank.
  • Credit Card Loan.  You should have a good credit record before your loan would be approved. Further, the amount that you can borrow will be based on your credit limit. Therefore, if your credit limit is only up to 50,000, that is the most that you could borrow. But then, there are occasions when you could request the increase your credit limit. Such request is still for approval, of course. The good aspect of the credit card loan is that you do not need to pledge a collateral. There is, however, a corresponding interest rate that will be added to the principal amount of your loan. Some credit card companies gives 3.5% interest.
  •  SSS/GSIS Loan. If you are in the Philippines, we have an institution where we could loan in case of necessity. SSS could help for private companies. For employees who are in the government, GSIS can help in getting the funding you would need. For SSS, there is also a corresponding interest rate that will be added on top of your principal loan. The amount that you could borrow will depend you your contribution and if you were already able to pass a successful loan before.
Partnership. This is one of the options to get your business kicking-in. A person or an entity who could join in to your venture can make your business stronger. This is applicable for medium to big business concept. Having a partner could help you finance your business. It could also contribute to a more input and ideas in order to boost your business. For sure, your partners will have the concern that you are expecting from them because they are also part of the business. If the business goes down, they will go down with you. If the business booms, your partner will gain the profit as well. The downside is that you are not the sole owner anymore. You will not have the whole profit anymore. This said, the voice is not unilateral anymore. This is because you share your business with your partners. But then, as you share your profits, you also share your responsibilities and the challenges that goes with the business operation as well.

Sell Your Shares/Previous Business. If you have stocks, liquidate them. If you have a business that is stagnant, sell them. This is not applicable as an initial step to get the business funding. It would be better if you would be able to get your business going without sacrificing your other investment. If you will opt to this option, make sure the new business has a very promising concept.

A business man once told me, do not let go of large amount of money in one sitting. If you will go into business, it is advisable to start small. Nurture the business and start from there. Letting go of large amount of money for one venture is very risky. Unless you have the proper foundation and sound business plan, start SMALL.

I am also looking into a business venture. I am hoping that this will be realize on the soonest.Just like you, one of my challenges is the funding. Capital seemed to the one of the factors in starting a business. Just as a colleague told me, there are big business that started small. Between planning and capital, it would be better to focus on the strategic plan in operating your business. Exhaust your resources and play the most out of what you have right now.

Picture courtesy of  walcoo

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