Options to Finance Your Business

According to B.O. Wheeler, meaning of business finance includes all business activities which are primarily concerned with the procurement and conservation of necessary capital funds in satisfying the organizational goals and objectives of an enterprise. Business is characterized by the generation, sale and distribution of goods and services for meeting the basic human needs and requirements of the society.

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Options to Finance Your Business

According to B.O. Wheeler, meaning of business finance includes all business activities which are primarily concerned with the procurement and conservation of necessary capital funds in satisfying the organizational goals and objectives of an enterprise. Business is characterized by the generation, sale and distribution of goods and services for meeting the basic human needs and requirements of the society.

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Business has become so interdependent on finance. Without proper finance, it is virtually impossible for any business to make money. A company without finance cannot purchase raw materials, employ workers, build infrastructure or make money even to pay their operating costs. So, if you are planning to set up your business, the first thing you should do is prepare an exhaustive financial analysis.

The purpose of business finance is to ensure that an enterprise operates by availing its productive assets efficiently. It also helps a company to meet its obligations to other enterprises and to meet its obligations to customers. Therefore, to begin with, one should understand how the business is conducted: What products or services do the firm sell; where does it obtain its raw materials and how does it process them; who are its clients; what legal obligations it faces and what are its business activities.

After understanding these aspects, you should proceed to identify the appropriate sources of funding. One can raise capital from various sources such as banks, financial institutions, venture capitalists, registered investment firms, and registered investment partnerships. However, you should note that you will have to bear heavy losses in case you fail to get investors interested in your shares in the initial stage because in general, the higher risk involve, the lower the share price you will be able to fetch. To attract investors, you should undertake regular research into the financial markets and ensure that you keep yourself well informed about the happenings in the financial markets, as this will help you make appropriate decisions regarding investments.

To finance your business, you should first identify the opportunities that exist in the financial markets and then take advantage of these opportunities. For instance, if you are starting a manufacturing company, then you should look for opportunities in the manufacturing sector. The manufacture of small business may involve manufacturing plastic products; producing textiles; making metal products; producing appliances; producing seeds and plants for food; manufacturing machinery; manufacturing oil and gas; manufacturing rubber and synthetic fibers; manufacturing electrical and electronic goods; and so on. In order to take advantage of these opportunities, you need to identify potential investors who may be willing to finance your business. You can use angel investors or venture capitalists for raising money for your business through a private placement or a series of personal loans.

Another alternative is to raise finance from financial institutions such as banks. Banks may want you to arrange for loans using your business finances so as to finance expansion. They usually offer loan programs that allow you to finance the purchase of land, buildings, machines, and other property through the issuance of secured notes. If you do not have ready cash to arrange for such large capital investments, you may opt for secured convertible debentures instead. However, you should keep in mind that unless you make your payments on time, the bank will not be liable to provide you any kind of line of credit because the finance is based on your future earning capacity.

The third option for financing your business would be to apply for a loan from the Small Business Administration. Although this government program offers financing at low interest rates, you should know that there are still some requirements needed for eligibility. For instance, your business would have to show proof of steady cash flow so as to qualify for the loan. Another requirement would be that your business would have to produce an annual profit and a cash flow statement showing your total revenue and expenses. You may also want to look into the possibility of tapping trade union funds for capitalizing your business. This can be another great option but you should remember that most trade unions do not have enough members to support such a fund, thus you should check first if your trade union is willing to finance your business.

These three financing options can all be very useful in your efforts to finance your business. Keep in mind that although these are great options for small business finance, they may not be enough to finance your business when the need arises. If your business has proven that it has the capability of producing sufficient cash flow, then there is no reason why you should not use these options to finance your business. But if your business has not yet established its income or reputation, then it would be a wise move to rely on the other financing options available in the market. There may be times when all three of these methods will not work, but then again, what is important is that you never say no to a great capital funding option like a loan from the Small Business Administration even if it is something that you are not really expecting to receive.

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