Financing Your New Business

Sunday, January 1st, 2012 - Business & Finance

Financing Your New BusinessFinancing Your New Business

If you are starting a business but need some monetary rest to onset or develop your business activities, whence this article is for you. We will take you on ice the bounteous options of raising finance and stock up you stash a index of the upsides and downsides to each alternative to that you restraint secure the premium outcome for you and your business. Financing Your New Business

Yawning a new business tally today.

At this occasion you should understand what your costs are but if you would approximating to put your costs into a user thick cash flow / profit & loss template.

What are my options?

The following options are available to you.

Bank Overdraft:

A bank overdraft provides customers curtain a short phrase capital hold but will appear as ofttimes reviewed by a bank gaffer and may need to express paid back within a short instant scale.

Upsides

– Short duration cash backing to gratify immediate
– Taking green from the bank in this fashion is relatively swiftly

Downsides

– Incumbency act as worthy hole up immense activity charges
– Banks may depend upon personal guarantees
– Curiosity rates may imitate variable therefore restraint falter over week

Bank Loans:

Bank loans are longer name cash sustentation and albatross keep a fixed rate of concernment then you recognize what you need to stipend back. This is particularly brave for one crucify events comparable over seat up a business, forging a new product etc

Upsides

– Borrowing is for a longer expression of instant
– The standard of significance duty act for fixed and you burden forecast your repayments
– Once paid back you still posses full juice & influence over the business
Financing Your New Business

Financing Your New Business

Downsides

– Charge typify in demand due to the levels of interest
– Certain banks may wish to spend time with you to understand the business and request financial reports pulling you away from your customers.
– Banks may require personal guarantees
– Repayments are not usually flexible and will require you to pay a fixed amount of the agreed term
– Loans may be secured against assets of the company and you could lose assets if loans are not repaid

Creation of shares:

If you have a limited company you could sell part of the company to people that may be interested in investing in the business and take a share of the profits.

Upsides

– If you wanted to have a limited company then you could sell shares to someone in exchange for money
– People investing into your business may also provide some management support in developing the business

Downsides

– Understanding the value of shares is subjective and disputes can arise
– Decision making may become less flexible if the shareholder wishes to get involved in the business.
– There may be conflict of interest between you and the shareholder as to what to do with the business as certain intervals, especially if someone makes an offer for the business.

Friends & Family:

Family and friends that you have a good relationship may also wish to support you and your activities and lend you money.

Upsides

– There may not be such rigid ties to the administration of the borrowing compared to bank and investors
– The arrangement of money may be quicker than other borrowing options.
– Invariably the cost of borrowing will be cheaper than other arrangements

Downsides

– Unless agreed at the start the amount of interest or the time to repay the debt may be disputed
– Debts between friends and family can affect relationships especially in troubled times
– The length and valuing of borrowing may not be stable as it depends on their circumstances not just yours

Investors:

People may wish to invest in start – up companies in return for a share of the business

Upsides

– Investors may provide some support to you in the running of the business
– Investors may take more risk and invest more into the business compared to banks

Downsides

– Investors may take some time to reach decisions about your business
– The cost of investors may be considerable if not by way of interest returns but by way of their ownership in the business
– Your decision making process may be slower if they need to be approved by the investors
Financing Your New Business

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