Thanks to a
multitude of financing options at your disposal these days, your dream of
starting your own business is not far-fetched anymore. A wide array of lenders
and an equally wide range of loan options all make it easier for firms to turn
their dream into a living reality.
The only problem
is that when you’re spoiled for choice, it becomes difficult to make a wise and
intelligent decision. A decision that perfectly suits your business interests.
Therefore, here we’ve tried to list out all you ever need to know about business finance before you start its pursuit.
Business Finance – What it Means
In layman terms,
it refers to the amount of money loaned away by banks, financial institutions,
and other such lenders to establishments for use in business. The capital is
generally employed for purchase of business assets, goods, raw materials,
equipment, and several other activities essential to the smooth functioning of
a business.
Types of Business Finance
There are a number
of categories to choose from and it’s important for a business firm to have
basic knowledge of these various types. Only then it’d be able to make the
right choice keeping in line with its specific requirements and also ability to
repay.
1.
Debt Finance – This is the normal loan amount agreed upon by a lender to
a business and may further be categorised into two – Short-term loans and
medium to long-term loans. As the name explains, both these types of finance for business are granted for short durations and medium-to-longer
durations, respectively.
2.
Asset-based Loans – These are generally granted to businesses for purchase of
assets and equipment, which may include machinery, property for office setups,
financing export-import of goods, etc.
3.
Mezzanine Finance – This type of financing option is ideal to facilitate
expansion of existing business organisations.
4. Relatives and Friends
– Though not very popular and commonly used, it’s also a good idea,
particularly for extremely small start-ups which may not be able to afford
other financing options for their business.
Importance of Securing Finance for Your Business
Setting up a
business and managing it through the year requires hard work and working
capital, of course. You’d realise this either right from the beginning (if
you’re a start-up) or at later advanced stages (if you’ve an established
presence). You need capital at every stage of your business – small or big, for
short terms or longer.
Not always would
it be possible to squeeze out these amounts from what you already have.
Therefore, obtaining a business loan would work best for you in a number of
ways –
-
To meet
emergencies
-
To boost higher
sales and marketing efforts
-
To avail better
and newer business opportunities
-
To purchase and
equip advanced technologies for improved results
Summing Up
As is evident,
working capital is a must for all of your business needs at different times.
The ease of obtaining a business loan at such times truly comes in handy.
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