Common Sources of Funding Available for Entrepreneurs A common source of funding includes private investment banks personal savings and assets friends family members corporate funding and grants Advantages and Disadvantages of Funding Sources Whether you re funding a new business or trying to expand an established business choosing the right source of financing for one s situation can be challenging While you can choose from several options each source of funding comes with its own set of advantages and disadvantages Jennings R 2018 The advantage of borrowing money from a bank is that it allows you to keep your cash on hand to use as operating capital or for personal survival during slow times in your business You may be able to protect your most important personal assets by declaring bankruptcy in the advent the company is unsuccessful The disadvantages are that you ll have to pay interest on the loan Your payments will be due on time regardless of whether the business is doing good or bad Jennings R 2018 The U S Small Business Administration SBA offers several loans and grant programs to help startup companies and assist existing businesses to expand Grants are free money and government guaranteed loans come with interest rates that are typically lower that you can get on your own Jennings R 2018 Disadvantages are that they come with a lot of red tapes and may not be available for every type of business Budget issues from year to year may affect the availability of funds
A government guaranteed loan is still a loan you ll have to pay it back regardless of whether the business is successful Jennings R 2018 Private Investment can be a good source of funding individual investors can help raise startup capital without placing all the risk of loss on yourself Disadvantages include bringing in investors you do give up an element of control over the company Even if you retain a majority interest you ll need to keep your investors happy If you share the risk with others you ll also have to share the profits Jennings R 2018 Personal savings and assets can be a great way to finance your own company forcing you to live within your means investing in business equipment and marketing only when you need to Self supporting your business gives you more control than other finance options You will know exactly how much money is available to operate your business and you will not have to spend time securing other forms of funding Using your own money to support your business can put a burden on your family and personal life and if your business were to fail you could lose your home and other personal possessions Borrowing money from friend or family can provide lower interest rates and flexible payments Though there are disadvantages of borrowing from friends and family Meddling family disputes and lack of clarity can cause issues between you your business and the friend or family member who has lent you the money prompting the company and your personal life to suffer Corporate funding helps align a company with an established brand hence gaining a competitive edge in the market
Corporate funding may bring about tax benefits and creates a positive affiliation among the parties involved Corporate Funding may bring about conflict in business due to conflict of interests between parties involved especially from the source of money Slow development of business deals where the financier is a corporate due to their time consuming decision making processes Early terms involved in the financing may heavily favor the corporate which endangers the business Alternative Funding and Where to Find it Finding funding can be daunting though there is a way Not all avenues to funding start at a bank or credit union even friends or family are not always where you begin A great place to start looking for funding is at your local SBA and score offices They offer information on specific websites companies and financial establishments that are actively looking for startup businesses to fund There are also a vast number of companies that are offering grants December 11 2017 Some of these grants depend on what type of business or product you intend to provide Though there are several grants that look to support minority groups non profits and female owned businesses There are many that are just looking for a great idea to back
Many of these grants do request that you make a pitch to them whether by sending them a comprehensive business plan and budget or by preparing and submitting a video about your business There is a way to start your business research and pitch fight for the financial ability to reach your dreams of business ownership Reference December 11 2017 Want Free Money Check Out This List of 106 Small Business Grants Retrieved January 10 2018 from https www fundera com blog small business grants 2018 Choose the Right Finance When Starting Up NI BUSINESS INFO CO UK Retrieved January 10 2018 from https www nibusinessinfo co uk content advantages and disadvantages using your own money start business Jennings R 2018 Sources of Financing and Their Advantages Disadvantages SmallBusiness Chron Retrieved January 11 2018 from http smallbusiness chron com sources finance advantages disadvantages 14407 html
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