Every small business idea or startup needs resources or small business financing to take off and flourish as an ideal business. There is a number of options that one can consider for small business finance.
Small business or startup financing or franchise financing are methods that the entrepreneur applies to get resources to implement the business idea. It can entail a number of approaches like personal finance, bank loans, government, equity, and other sponsorships.
The small business financing landscape transformed drastically after the world financial meltdown of 2007–08, known and regular financing options dried out and new methods emerged for small business financing.
This article will outline some of the existing traditional and more innovative new small business financing models that can be used by an upcoming entrepreneur.
Starting up a business you need to put in your own personal finances to get started. It could be the initial resources for registrations, drawing ups plans and for your initial production. Person finance can be in form of assets used a surety when applying for bank loans and other such
Many times small business finance comes as soft loans from acquaintances spouse, family friends, and parents. This is patients capital or love money it normally comes cheap with not strict repayment deadlines or competitive interest rates. Repays it once the business starts realizing
profits. This form of small business finance has a couple of challenges family always want a stake in the business but might not invest substantial capital in the business.
Bank loans are traditional forms of financing models for small business and big business. They have different options for financing but they
need surety and specific documentation like business registration, business plans, and financial projects. To access this finance one should be ready.
This is a relatively new model of small business finance, very fascinating more appropriate for inventive industries such as art, music, design studios or apparel brands, or practical industries and software. The methods propose that instead of getting resources from one get little shares of the cash from different individuals. The individuals then in return they get a stake in the company and share an interest in an exchange of their cash. This works well if people are will to invest in your business with a potential for good returns in future.
Angel funding or investment depends on “angels” wealthy people who invest in a start-up business for a small stake in your business. There are different models that the angel funds operate some may want to be part of the decision-making process of the business with a seat in management while other done mind they will leave you to run the show. The other group may just want to be mentors and not make a decision on your business.
There are many other forms of small business financing models not discussed here that can be considered when starting a business.