6 Ways to Finance Your Company
Rare is the businessperson who says, “we have too much money.” We’ll ignore what to do with extra money. We don’t think of that as a problem. But, what options are good for getting more funds to work with?
Clients Prepaying for Services - This is the BEST solution - for many reasons. First of all, this costs you nothing. It is the cheapest source of funds. It is also great because it clearly demonstrates that your clients really want your products or services. Clients will typically only pay you if you offer a unique or hard-to-find service.
Friends and Family - Although this may not be the oldest type of business, it’s likely the oldest way to get funding. However, while this is often the easiest way to start or grow a business, it comes with the expectation that you’ll do your best to help your friends and family keep their investment and hopefully earn more. You should always promise to do your best for them.
Banks - Banks are excellent sources of funds. However, it’s an open secret that they will only lend to you if you have so much collateral that you really don’t need them. Banks are an excellent choice for a very healthy business or a wealthy business owner that will personally guarantee repayment.
Credit Cards - Although often not recommended as a permanent source of financing, they constantly rank as one of the easiest, fastest, and least financially intrusive ways to collect operating capital. There are many type of credit card choices.
Receivables/Sales Debt - A good way to raise quick capital, if you have regular sales, is to either sell your receivables, or your short term sales. This type of debt is usually not cheap. However, it may not be prohibitively expensive.
Secondary Loan Market - There are a huge amounts of possibilities here. There are many reputable companies that are allowed to lend money. There are also some shady characters hanging around bars that will also do so. (Hint: Stay away from shady characters.) Basically, it comes down to the more desperate (or ignorant) you are the more you’re likely to over pay for money.
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