There are many creative ways to finance your business. Here are some common and creative ways to finance your business.
Family and friends
1st Write a business proposal how to write if you get a loan from a bank. Talk about what the company has the demand for the product or service market, how you want your product or service market include financial projections: How soon expected profit of enterprises. Include financial statements and tax returns.
2nd State how much money you need, for which the money and the terms of the loan will be used, because the interest rates as you want to repay the loan either in a lump sum or regular installments. You must also specify whether the loan is secured, in the event that you are not in a position to have the loan will repay the lender a percentage ownership in the company. In your proposal more attractive to the lender hold a promissory note or agreement specifying financial terms, payments under the law and the company where the note is not paid.
3rd Do not forget the tax advantages in the use of a promissory note, if you are for any reason will be able to repay the loan in full, the lender a tax deduction as “doubtful known will be allowed.” Warren Buffet, who today raised the second richest man in the world with an estimated fortune of 40Billion, $ 105,000 for his first working day of seven partners, two of which were his sister and aunt.
The equity ratio exchange of expertise
If you have a great idea you in a position to another, in exchange for services he is prepared to accept could find some form of equity. This may be legal, technical or marketing services, the possibilities are endless. For example, many new start-ups require legal requirements such as education is a public company. You can licensed attorneys in your neighborhood, specializing in start-ups contact, many lawyers, if the idea is that where the potential for future earnings is large, will agree to defer the costs of legal work, and pay application, you only the initial costs such as registration fees. You can offer anywhere from 1-2% for the postponement of the legal costs agreed to be paid if the financing was obtained.
People strive to be a part of the next big thing, making an attractive offer with reasonable prices, you can win-win business for your company grow and succeed. Many startups have used this strategy in financial start their business. When Google was just an idea, Google, Larry Page and Sergey Brin, the owners believe their company’s stock in exchange for free rent instead.
Commercial Loans
applied in a commercial loan, there will be many needs for paper, are usually also your business plan, financial statements, credit report, including documents and statements of income. A commercial bank will evaluate your company based on the 5C Credit:
1st Capital-What part of your own money you have in the company
2nd Character-your reputation, they will see on your credit score credit history, how your payments on time owed to other creditors, and if you have any judgments or liens.
3rd Strengthen your company’s cash flow and ability to repay the loan.
4th Collateral It has business assets such as equipment or real estate as collateral for the loan. Potential guarantees that someone else’s ability to repay the loan, if you is not to do.
5th AGB-How do you want to use the resources and for what purposes.
In a commercial loan requests that you compare several lenders that finance the companies they study, and interest rates.
The Small Business Administration loans (SBA)
If you have not become a commercial loan you applied for an SBA loan as a condition for applying for an SBA loan you for a loan from traditional lenders can receive request and were not able to obtain a loan under appropriate conditions. The SBA guarantees up to 75% or $ 750,000 of the loan from a private lender. As an entrepreneur you have to personally guarantee the loan and proof of your cash flow sufficient to repay the loan.
Angel investors and Venture Capital
Many startups have received investment Angel. Angel investors specializing in early stage financing. Often they are more inclined to invest in ideas that it too risky for a bank’s potential and not enough for a venture capital company. They invest in generally smaller amounts of $ 100,000 to 3 million and are willing to invest for the long-five years or more. Many times companies will start with an angel investment if the company is an easy-to-high net worth and immense profits to foresee a venture capitalist is more likely to get involved.
Specialized venture capital fund to invest in industries with high growth potential and rarely less than 5 million at a time when they want to grow the company quickly, and ideally have some companies to cash in on the stock exchange as soon as possible, in general 3-5 years. It can be extremely difficult to obtain venture capital to keep the entrepreneurial risk to 1000, annual business plans and are very unlikely that in a company that was investing referred by a friend. It is estimated that just can not even 1 / 600 business plans of companies in Silicon Valley notice, let alone the funding.
To increase your chances of funding, it is recommended that you trade associations and business organizations that have the participation of venture capital firms, so you can join the network and make valuable contacts. In the meantime, while you are networking and getting your name there, continue to expand and refine your products or services that best every day. Do not be discouraged if your business plan is rejected because it is very common and does not mean you do not have a good idea or a business trip. Scott Cook, Intuit founder of one company that offers more than 2 billion accounting software – Quicken and QuickBooks, has been emphasized by all venture firms rejected in 1984, venture firms, said that most people do not say nothing requires a computer accounting software, computer, there is no market big enough for us, in these sectors to invest.
Lines of Credit Mortgage
If you own a house with a large amount of equity you consider many want to obtain a credit facility, because they offer some of the best interest rates. It is important to carefully consider all risks, how to afford the monthly payments and do not want to lose your family at home, start your new business need.
Business Plan Competition
Business plan competitions are a good source to raise capital for your new business, where you do not start on the links with investors. Business plan competitions have become very popular in recent years at many universities and large companies, business plan competitions. Please send your resume or business plan, and if it is not normally selected your company to a group of judges of the financing that rewards the best business ideas. Some competitions have restrictions on where you will be connected in any way.
