Entrepreneurs seeking to grow their business are always on the lookout for where to get financing. The good thing is that the marketplace is awash with these funding options. It is upon the business owner to assess what option suits their business. In this article, read about the various sources of financing for your business.
Commercial loans refer to a form of financing where repayable money is lent out to individual and businesses. This facility, also referred to as bank loan is granted on the basis that the borrower will generate sufficient revenue to pay up the principal amount plus the accruing interest.
Bank loans vary in their terms and conditions. These conditions include factors such as interest rate, repayment period and instalment amounts. For an entrepreneur, balancing these factors is critical in the decision-making process of viable funding sources.
Venture Capital Financing
This form of financing entails the injection of finance into a high risk but potential business by investors in exchange for a stake in the business. Venture capital is suitable for highly innovative start-ups showing a great prospect of torrential growth in the short term.
Entrepreneurs with such businesses can seek venture capital firms for a financing arrangement. Besides the money, they will also benefit from expertise and the investors’ vast network in the marketplace. The downside is that venture capitalists part with a significant stake in the business. They are also not in the business for the long haul seeking every opportune moment to cash in and recoup their investment.
A recent phenomenon in the marketplace is the advent of angel financing referring to investors who grant their money to small businesses showing potential for growth. Besides the money, they also contribute their management and business skills in getting the business off the ground. Some angel investors also claim a stake in the business. They are less ponderous than venture capitalists.