Top 3 Popular Extra Funding Sources for Passionate Entrepreneurs
An important obstacle which all entrepreneurs need to overcome is obtaining funds to operate their organization. These proprietors don’t need to explain why money is the lifeline of their businesses.
A great idea and acumen alone are not enough to make large purchases and meet various expenses.
Moreover, these business owners need to think about expanding their current operations in their respective market.
The sources of finance they choose can sometimes determine the success or failure of their establishments.
This is the reason why they prefer to keep their options open. It won’t come as a surprise to anyone of you who hold the same view.
When do entrepreneurs need to rely on external sources to fund and operate their business?
Experts admit all business owners need adequate sums of money at all times.
On some occasions, such resources become more urgent than others. However, they have to understand that business funds come at a price.
They need to consider it as part and parcel of their operating costs. It is important for them to determine how they can put such cash to good use.
Here are 3 important situations which compel entrepreneurs to look for suitable financial sources:
This is a very cashflow problem all proprietors face from time to time. On particular days of the month, they notice there is not enough money.
They find themselves in a very difficult position when comes to meeting certain expenses. This could be paying their staff members, day-to-day costs and discharging their suppliers’ dues.
In many cases, such business owners have slow-paying customers. Such clients refuse to clear their dues with such entrepreneurs till the last moment. In the interim, the owners find it difficult to make ends meet.
This is the reason why these professionals suggest such proprietors should consider a suitable invoice factoring scheme. They can get the money they need to tide over the storage within incurring any debts. Moreover, such a financier takes on the responsibility of collecting the dues from their customers.
Large purchases and business expansion
As their business operations begin to expand, entrepreneurs need to upgrade their infrastructure. Only then can they cope with the demands of their customers. It is also a sign such businessmen are making progress in the market.
However, it also means they need to make certain large purchases. It could involve taking over another proprietor’s business, acquiring new equipment or facilities. For this, they need lots of money.
This is the reason why they need to look for suitable sources of external funds. At the end of the day, they have come across the saying ‘money begets money.’
However, such owners need to ensure they meet the requirements of their financiers.
All entrepreneurs know to operate a business successfully is never easy. Such business owners can never foresee when they run into very rough waters. They suddenly find themselves facing an emergency. It could arise when a piece of machinery sudden breaks down or a purchase they didn’t anticipate.
In some cases, it may result from blunders on the part of these proprietors or their employees. This is why they need to keep a certain amount of money aside for such circumstances. However, this is not always possible. This is the reason why they need to rely on external sources of finance.
Experts from reliable organizations like Liberty Lending USA say there are many ways entrepreneurs can finance their businesses. However, they need to choose one which caters to their specific needs.
Such professionals go on to point out the 3 most popular sources of external funds are:
1. Angel Equity
Many startup entrepreneurs find it extremely difficult to get their new organizations up and running. This is because such businessmen don’t have the money to accomplish this task. In such cases, they are willing to forsake or selling a portion of their ownership in their establishments.
However, the prospects of working with a venture capitalist may not appeal to them. They probably have serious doubts whether can meet the stringent requirements of such a financier. This is where angel equity comes into the picture. The investors of such funds are generally willing to spend their money on businesses they find promising.
Moreover, they also go out of their way to assist and guide the owners of such establishments.
2. Bank loans
This is one of the most common forms of debt financing. Banks provide funds to business owners to meet their specific needs.
This could be for purchasing new equipment, acquiring suitable industrial land or overcoming cash flow problems. The duration and terms of payments of such bank loans depend on its use. However, entrepreneurs need to remember these financial institutions have their own stringent requirements.
Many cases, the proprietors need to provide personal guarantees and suitable collaterals. Only then can they get the money they require for their businesses. The people operating such establishment may also want to have a look at their plans.
3. Smart leases
Some entrepreneurs have no objection to leasing equipment of other businesses to conduct they market operation. It helps them to save precious monetary resources which use to meet their operating costs.
However, such proprietors need to read the lease document thoroughly before signing it. In many cases, this mode of external finance is more expensive than obtaining a bank loan. They don’t want to end up spending a sum equal to the actual price of the asset. This can do their establishment more harm than good.
The 3 above sources of business finance can help entrepreneurs get the money they need. This makes it easier for them to run their establishments efficiently. However, they should know that each of these external funds has their own advantages and drawbacks.
They need to keep in mind their best interests and cost of such finance. Such business owners should choose an option which propels their organization to the next level.
For this, they need to be prudent, exercise self-discipline and seek expert help if necessary. Only then can they gain and consolidate the competitive edge in the marketplace.