When you manage a business you may from time to time need an extra input of
capital. Maybe you need capital because you want to:
- Expand your business
- Cover the loss of an order
- A big customer did not pay at time
- Unexpected expenses incurred by external parties
Financing simply means raising the necessary funds to cover your needs.
Different sources
There are several sources of finance ranging from the immediate ones such as
your private savings, friends and family to external ones such as banks and
investors.
Common sources of finance include:
Savings
You could contribute personally to the financing. The more self-financing the
less people you have to ask for support. If you do not have money in the bank,
maybe you have un-mortgaged property value, shares, or a car.
Friends and family
It might be a good idea to get friends and family financially involved in your
business as this will motivate them to help you find customers.
A 1.000 –1.500 $ investment in your business will probably not get any of
your friends into serious trouble, should you not meet your goals and not be
able to repay them.
Banks and savings banks
Most small businesses finance there business operation through bank loans. What
do banks require to lend you money?
The best tool for obtaining the necessary financing for establishing a business
from a banker is a detailed business plan or a plan for the spending of the
needed capital. And a pay back plan.
Investors
Finding private investors willing to invest time and money in your business is
another option.
If you have so much confidence in your concept that you believe it
constitutes an attractive investment object you should definitely try to
approach potential investors.
In order to make your business concept attractive to an investor you must be
able to offer a unique business concept and provide information material on your
project.
In other words, you have to create an attractive and interesting basis for
business activities in order for your potential investors to eventually make a
profit from your concept.
Financing of investments
If you have large single investments such as acquisition of buildings, vehicles,
or costly machinery, such investments often require a specific investment
programme as they must be financed on special terms. Consult your accountant or
different adviser on this subject.
- Go to next
business issue: Depreciation
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Copyright © 2009 Dynamic Business Plan 07-02-2012
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