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By Jacob Coroner
Some people dream of becoming an entrepreneur, but worry too much on where or how to finance their dream business – that is, where they should go and look for it. If you’re one of them or even have engaged in business for years now, here are options for your finances.
1. Personal Savings. You are most likely to use this as a source of your capital because this is the easiest way to finance your business.
2. Borrow from friends or family. This is self-explanatory.
3. Loans. Bank Institutions are willing to help in providing businesses with finances. When you’re thinking of borrowing funds from investors or loan institutions, much consideration should be given to the factors included in the financing deal: like the duration of the loan and the interest rate. Let’s say you opted for a short term loan. They are appropriate to use when you want to grow your working capital requirements such as accounts receivable and inventory. However, if you consider purchasing new furniture and fixtures or opening a new store, you might want to take long-term loans as this you could pay for a much longer time.
4. Sell assets that are already idle. These may be in the form of old machinery or equipment and it may also be other forms of property. They may be old and may have slowed down the operation of your business, but if they’re still useable, you might as well sell them.
5. Rent or Lease. Rent out a particular room or area in your building. This is also a great way of financing your business.
6. Equity Financing. You issue your equity ownership with the use of common shares. What’s nice about this option is that the capital you borrowed is interest-free and there’s no need for you to pay it back. However, your investors will become part-time owners of your business and may have an influence on you and on how to manage the business.
7. ‘Angels’. These are actually people who just simply want to help you out. They are actually mysterious persons. Possibly they see something good in your business. Some people coined them as ‘Donors’.
These are sources of financing your business. There may be other ideas out there, so it’s better to venture out and know some of them.
If you want to track your finances as to where they come from or where they are being spent, check your cash flow statement. Using the Cash Flow Statement, you can budget your money as to what you should be spending. You can pretty much make an opinion or an evaluation over a certain operation – that is, whether your business gains or not. Probable predictions of your company’s standing in the future can be made as well. Limitations of the Cash Flow Statement happens when, for an instance, you have generally less amount of cash on hand, yet are still earning a huge net income or vice versa. This could happen when there is more Accounts Receivable (or credit) than Cash.
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