Funding forms the backbone of any business no matter how big or small.
No start-up can even materialize without having some basic funds.
The Journey From A Great Idea To A Successful Business
Have a great business idea that has the potential to make it big? If yes, one must do all it takes to make the business idea materialize into a flourishing business.
However, fact be known, there is more to running a successful business than just a good business idea. Having the right funds to back your business happens to be one of the most crucial factors.
What are the other factors required to execute a business idea?
Other factors include,
• Having practical knowledge about the idea, as some ideas just appear bright on paper and their practical execution turns out less profitable.
• Having the right resources, place for start-up, raw materials etc.
• Know the right people who have the skill apt for your idea
• Working out the legal technicalities of the business etc.
A lot also depends on the individual trying to work out the plan. Having a business bent of mind, the tact to start and run a successful business, leadership qualities and much more are essential in an individual than the business plan.
Funding the business
Funding forms the backbone of any business no matter how big or small. No start-up can even materialize without having some basic funds. Sorting the finances required for your business can happen in many ways:
• You either use up all your savings, or start saving up so you can fund your own business
• You choose a loan, either a typical bank loan, SBA loan or any alternative loan
• Opt for Fundraising: investor capital or equity/consumer based crowd funding
If you have sufficient funds to support your business yourself, then you are probably in the best position. However, more often than not business usually requires a business loan or fundraising to back them up.
Business Loan or Fund Raising?
Whether you choose to opt for a loan or go for fundraising is completely an individual choice. It depends greatly upon the nature of the business, the kind of cash flow it will need and how much and how soon are the returns expected?
Each financing option has its own share of advantages and disadvantages. It is best to weight both the options, before decided which one is best suited for your business start-up.
You can choose to take a business loan to start your business. It could either be through the regular bank loan option, or you could try getting a SBA lender who is a Small Business Administration lender, or other alternative loan options that are available.
Opting for a business loan mainly is that you can retain full ownership of your business, before, during and after the business loan.
The rate of interest of different kinds of loans may vary, but will last only as long as the loan period lasts. After which the business and its profits are completely yours.
Opting for business loans especially though traditional banks, means involving tremendous paperwork. The banks require all your personal as well as business related documents in place. A person has to satisfy many pre-requisites before a loan procedure, which is challenging for a start-up and payDay Loan to raise money quickly, Borrow or Fund raise?.
The absence of any documents adds to delay in the loan procedure. The bank loans tend to take a long time to materialize.
Opting for a SBA lender or alternative loans may require lesser documentation. The time frame also may be lesser in such cases. However the rate of interest involved is much higher. This may get difficult, for a start-up business.
Also, if one fails to repay the loan there is always a risk of losing out your collaterals.
If you find yourself either an investor or opt for crowd funding, you may not have to worry about loans and interest rates etc. But it would mean more than just getting money from investors. Fundraising also has its share of advantages and disadvantages.
Having an investor does not only mean having funds for your business. It also means you have someone to share responsibilities with. It means having an extra pair of hands and mind too. An investor could bring along with them newer ideas, other options to cope with situations. They may also have resources in other areas that you may not.
You need not worry about paying off loans, or the threat of losing out your collaterals, in case your business returns takes longer than expected.
Choosing a crowd funding is also a good option, as the barriers tend to be lower. Also, it is an easier process that does not require lengthy paperwork.
This option works well even in case of start-up business ideas.
Also, fundraising option is available at any stage of the business and is not just a ‘start-up’ option. At any stage in the business if you feel the need for an investor, you can always look out for one.
The prime disadvantage of fundraising is that your business can never be solely yours. You will always have to share your business with the investor/s.
Once your business starts giving returns, you end up sharing a large sum of your profit as dividends to the investors.
Also, more people involved would come with more chances of opposition to any lateral venture; more people would have to be convinced. You will no more be able to carry out any lateral venture without the consent of your investors.
When you opt for consumer crowd funders, the success rate may be lower and may take longer time to begin.
Which financing option is better?
While each style of business financing has their own share of pros and cons, they are many factors that require to be considered before deciding which way to go.
The kind of business idea you have is the primary deciding factor. If your business you use more heads and more ideas opting for a fund raiser may be a good choice. But if you are the sole in-charge of the business plan, then going for a business loan would be advisable.
Opting for any financing option because the other appears difficult or because others are opting for it is not correct. Choose what is best for you and your business.
It is best to stay informed about other financing options as well. PayDay loans are also other techniques of funding your business plans. It would simply mean you apply for a loan, either online or at a PayDay outlet. You share your personal and financial information. You pay the fees for the loan and a loan amount will be given to you in cash or deposited in your bank account.
You then repay the loan on your payday with either a post dated check or other options.