Ways of financing your business

Raising capital for your business can be a challenge and a barrier to the eventual commencement and implementations of your business. While sourcing for fund, you need to, first of all, identify how much you need to start or grow your business.

Below are many varied paths you can source funds to finance your business

Personal savings

This is the most preferred source of fund for most businesses. It includes inheritance or personal savings generated or saved from your previous endeavours. The volume of money available for use depends on your income, your ability to save and to consume and the level of taxation. This source of fund constitutes no liability to your company and it is usually interest-free.

Family and friends

This is the next most common sources of funding after personal savings. This is the money you receive from wealthy family members or friends. The good thing about this source of fund is that your family and friends can assist you without being worried about quick returns.

Bank credit

Banks provide the major source of fund to businesses with overdraft and term loan being the most popular bank credit open to both new and existing enterprise. The problem with this source of fund is that banks usually require collateral and the interest rate is usually high. Every entrepreneur at some point in his business career will seek a bank loan. It is usually advisable to buy company assets with bank loans instead of using it as the operational cost of your company.

Partnership

Partnership in its simplest definition is a legal form of business in which two or more individuals share the management, profits and liabilities of a business venture. With a view to expanding the capital base of a new venture, you may decide to take on a partner or partners.

Money Lenders

These are individuals or group of individuals (distinct from banks and financial institutions) who offers small personal loans at high rates of interest. Make sure you fully understand the terms and conditions of the contract before you borrow money from them. Some money lenders give conditions that look sweet but dicey. Some contracts are also constructed in such a way that you end up losing your company if you fail to meet up with the terms and conditions.