Tag Archives: Fund Your Business In 14 Ways
Do you have any plan to open a new business? Or maybe you would like to raise additional fund for your existing business? Are you having second thoughts where to get the fund that you need?
Whether your need is for an expansion or just trying to save the day, here are some options you can look into in its proper order of priority:
Your own savings
Save from your own money and use it to fund your business. When you are looking into starting your own business, it is highly advisable that you start with saving enough money to fund your business. There is nothing wrong if you delay your plan for a couple of months to give you space and do your business plan properly. It is much easier to manage a business without credit exposure in mind. You can concentrate on your product or business promotion and marketing or simply focus in the operation rather than looking into the bank account and pressure yourself about any loan repayment.
Immediate Family Member
If your savings is not enough, then you can go to your family member to get additional of what you need. At least they are not to expect you to pay for interest. Nevertheless, they will be happy if you repay the principal back soon.
A close relative is someone who treats you as member of immediate family. You can discuss with them your plans and let them know that you may need their help this time. At least you need to discuss how you are planning to repay them.
Here, timing is necessary. Observe first and find out who among them might be capable to assist you. If you get something from them, make sure you repay them.
If you have plans to go into business in the near future, then you should start applying for membership with any local cooperative nearby. Cooperatives usually provide financial assistance for members who would like to borrow money for a project or for any other reason. Besides, what you invest here (i.e. membership, monthly dues) is worth it. As you become a member, any profits the cooperative have gained are divided among its members through dividend. It serves a two-way purpose: you help the community through the cooperative and the cooperative helps you as a part of its community.
You will have to treat this the same way as you would borrow from your distant relative. Sometimes it will take some quality time before you can convince them. The others would expect some sort of interest in return. If you have another means to bargain or trade-off, the easier it will be to convince them. Just don’t include blackmailing any of them! 🙂
Inquire if your company has any existing financial assistance program extended to employees. Make a company loan according to what the company can offer and if this is not enough, find an additional money somewhere else.
Offer for Partnership or Joint Venture (JV)
Look for a potential business partner or a JV partner to reduce your fund exposure. Depending on your partnership arrangement, your partner may provide a certain percentage of the fund required for the business. Just make sure that you own the major part of the business. Note that if you have a JV Partner, part of the business profit will be sub-divided according to the percentage of ownership of both partners.
This is almost the same as Partnership but only with more partners involved. Usually, it takes 5 people to start a corporation. Each of them will have to provide their own share of capital. On certain cases, Industrial Partners becomes a part owner of the corporation without injecting capital due to his skills to run the business or his ability to create a large market or both.
These are investors who may have been endorsed by someone and is willing to inject fund without getting himself involve in the actual business operation. The interest of an Angel Investor is purely focused on the Return of Investment (ROI) which is expected out of the operation of business in a certain period of time.
Existing Government Financial Aid Programs
Look for any existing financial programs being provided by the government for some forms of businesses that contributes to the growth of the economy. An example is if you intend to venture in an export or import business. In this type of business, there are existing facilities ready to assist as provided by an agreement between the private sector and the government. Investigate further and look for an alternative like what has been mentioned.
Rural Banks provides a reasonable interest rates and processing fee which is considered lower than commercial banks but resources are limited. There are documentations to comply with in order to process a loan application. Approval or denial of loan is subject to further examination by the Board of Directors.
Commercial Bank has a very wide resources and considerably higher interest rate and processing fee than rural banks. As commercial banks are corporate-focused, they will require a lot of documents from their borrower. If you are ready to patiently look for, ready, and prepare the documentary requirements, then you can give it a try. But at least don’t expect that things will be easy.
Not recommended! They normally charge very high interest rate which you may not afford to completely repay. For more information about this, check my article on Loan Sharks.
Now here is my 1 peso personal tip: Plan your business well. Know its ins and outs. Spend time and put yourself in a brainstorming activity to ensure the success of your business. When you are confident that your plan is fool-proof and expects the 100% success of your business, spend another time to conduct a reverse brainstorming. By reverse brainstorming, you should study how competition can destroy your fool-proof plan. You also have to consider the pitfall that may come from the inner side of your business. Consider your financial capacity, unexpected incidents, manpower behavior which all can influence the advancement of your business. Identify the factors that can hurt your business or can take your business down and make plan on how to avoid it. Practice it regularly and always look into your business’ behavior on a step-by-step manner. More importantly, repay your creditors so you can ask them for assistance some other time. Enjoy your business and have fun!
Also recommends 15th Way To Get Business Funding