The following is an article “Three Ways To Finance Your Business” by Marc Primo.
One of the biggest challenges faced by entrepreneurs when taking the plunge and starting their own business is how to best finance it. Whether you’ve saved up the capital to get started or rounded up enough investors who believe in your vision, securing the initial outlay is the major big decision you need to make.
The following three financing techniques are the most common and cost efficient methods of getting your business up and running, at minimal risk and at the utmost convenience:
Bank loan - The standard route most start-ups take to finance their business is via a bank loan. While virtually all banks have become much stricter in recent years when it comes to loans, established financial institutions like J.P. Morgan Chase and Bank of America have allotted funds for precisely this purpose. Granted that you meet all of the requirements to be eligible for a small business loan, financing your business this way is arguably the safest and most practical option available to you, wherein you may leverage on wealth management via your personal banker with whom a rapport has already been built and a trust factor already established.
Credit card - Unlike a bank loan, relying on plastic to finance your business is a lot riskier than you might think. Scheduled credit card payments might seem doable and straightforward in the beginning, until the operational expenses of your new business get in the way, as well as the inevitable unforeseen payables that force you to make minimum payments every month, wherein you find yourself stuck in the debt monster’s chokehold for what seems like an eternity. However, on the other end of the spectrum, responsible credit card use can work to your advantage and serve as a convenient financing method that could simultaneously bolster your credit rating while earning yourself nifty privileges and rewards.
Passing the hat - An age-old tried and tested method of raising funds to start a business is to approach financially-stable individuals with whom you already have a solid relationship. Whether it is a close friend or family member, more often than not, the only collateral you will need to provide is your word of honor. While this might sound simplistic versus putting your home or car on the line when taking out a bank loan, it is in fact a lot riskier since personal relationships are at stake. And even if getting the business financing you need sounds easier than getting that loan approved when a loved one is willing and able to provide it, you still run the risk of ruining a friendship or severing a family tie, if and when Murphy’s Law comes into play.