HOW TO CHOOSE THE BEST FINANCE OPTION FOR YOUR BUSINESS
Business finances are a never-ending need for small business owners and startups. At first, getting the capital would be all you need, but later on, other business needs arises and must be attended to.
That is why small business owners never stop looking for sources to get funds to support their business. The capital is not always enough to cover all expenses.
With growth, comes a need for expansion and other expenses like extra equipment and staff. How does one fund them? The answer can be given to you by any of your chosen finance option. Click here to get more about business loan requirements.
Before deciding if your business needs funding or not, be sure your business needs funding and decide whether or not the option you choose is best suited for your business.
Does my business Really Need Funding
The truth the need for extra money by small business owners and entrepreneurs never finishes. Needs are always arising and money is always spent, checkout the government and other funding options on www.usa.gov/funding-options. Before requesting for financing it is necessary that you are that the expenditure is worth sourcing for finance. Not all business needs are worth financing. Situations that call for funding may include;
- Large purchases: In business, it is normal to spend money, before you can get returns. Like I said before, businesses grow and the need for new equipment become necessary. If your business cannot afford it or using the cash in hand would put a great strain on the business, then you can source for funds.
- Cash flow shortages: businesses run low on cash sometimes. It’s totally normal. The gap between the income and expenditures might be too wide sometimes. This a good enough reason to source for funds. But if the cause of the problem is from within, instead of sorting for funds, just fix the problems.
- Emergencies: there are so many accrues risks in running businesses. Risk taking has become an imprint in the heart of most entrepreneurs. Not all risk are good risk and not all will yield desired results.
Risks with bad results often lead to loss and they are not always minimal losses. Most of these bad results are unexpected, hence, they become an emergency. To cover up for the loss, you might have to source for financing.
What kind of financing is best for my business?
There are over 44 finance options available to small business owners. But what option is the most suitable for your business? All the options fall under two categories that will be looked at in this section.
- Debt financing is borrowing with no intent of ownership by the lender. As long as you meet their requirement, you become eligible. They include; banks, traditional lenders and credit unions.
- Equity financing is usually provided by investors with intent of having part ownership. In this category, there is no repayment. An example is angel investors.
If you run to financing agencies immediately your business has a problem, you might run into debt. Small business owners should learn to evaluate their business before vying for fund.