Every year thousands of businesses are opened for the first time, and thousands more enjoy their first few, formative years. Being a business owner is a dream for many people throughout the world, but becoming one takes drive, determination, and ingenuity. It doesn’t come as much of a surprise to hear that capital and funding problems are the main source of struggles for businesses, both new and old. Some businesses even struggle with the problem of getting too big too fast and not having access to enough capital to keep up with the growth. Thankfully, there are several options for business owners looking to increase the capital in their businesses.
The most traditional way of gaining capital for a business is by applying for a business loan from a bank or other financial institution. While this is the way that most people think of first, it may not be the best way. A loan is just that, a loan. There are interest fees to pay on top of the principal, strict timeframes, and sometimes confusing and complex terms and conditions that come along with the money. Taking on debt for a business always comes with risk and should not be taken lightly. While a bank loan is a viable option for some businesses, it should be considered carefully and the risk reward ratio should be taken into consideration before going this direction.
Another common way business owners consider gaining capital is by fundraising, either from friends or family who are willing to invest in the business or by venture capitalists, who generally buy a portion of the business in exchange for funding. While this can be a decent option for some, the worry of ruining relationships with family and friends can be a major deterrent. Additionally, venture capitalists can be very particular in the types of businesses they invest in and can sometimes have unreasonable terms or ownership demands.
For business owners not willing to go into debt with a loan or risk personal relationships by fundraising, there is another option! invoice factoring is a great way for business owners to get capital that they have already earned without the hassle and risks of other, more traditional financing options. Invoice factoring works when a business sells its existing invoices, or accounts receivable, to a factoring company who then pays the business a portion of the total invoice right away. Factoring companies, like Universal Funding Corporation, have been helping businesses get access to capital that they have already earned for many years. Invoice factoring can be a great option for businesses that already have sales but are trying to stretch their resources to cover the potentially long invoice repayment schedules.
Gaining and maintaining business capital is an ongoing process for many business owners, but knowing the options available can make the process just a little easier. Each and every business is unique and the risk to reward ratio for each funding option should be considered carefully before being utilized, but when business owners know their options, they can make the decision that is best for their situation. Whether getting a bank loan, fundraising, or utilizing invoice factoring, keeping businesses up and running is great for the economy, and great for the employees who dedicate themselves to the business!
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