Starting a business or a company is not an easy task, especially when you do not have adequate finances. Even with the best business plan at hand, business financing is one of the most fundamental factors you should consider before anything else. There are several financing options available for both new or startup business owners.
The best financing options available in the market are by seeking funds from licensed moneylenders. However, not many have a good credit score to acquire a loan. Despite this, individuals with a bad credit score still have several options available to help them fund their startup.
Here are the 5 best financing options you should seek today.
1. Venture capitalist
A venture capitalist (VC) is a financing option in which you will exchange a percentage of your business for capital. The percentage of business to be given up is negotiable as it depends on the company’s valuation. A venture capitalist is a good option for individuals with a bad credit score and no collateral.
Apart from financing, a venture capitalist will bring in an abundance of experience in running a business as well as industrial connections. However, while a venture capitalist can help you to grow your business, excellent management skills are also essential.
2. Invoice financing
With invoice financing, a financial institution will help your business by paying off unpaid invoices. You are then required to repay the money once the customer has paid off their unpaid bills. This way, you can ensure that you will not run out of cash flow.
Another financing option for small business owners is through crowdfunding. Crowdfunding is where small business owners borrow money from several investors instead of a single investor. Seeking funds from a large group of investors can be advantageous for them as it allows for risk diversity across other high growth companies, making it a good option.
4. Convertible debt
Convertible debt is when you borrow cash from an investor with a collective agreement to convert the loan to equity later on. In this deal, you will be required to pay investors to receive a given rate of profit at the end of every year until a specified date.
The advantage of convertible debt is that it will not place a strain on your business cash flow. However, one negative aspect is that you will have to let go of some percentage of your business in the future.
5. Licensed moneylenders
The most comfortable and most accessible option is by borrowing money from licensed moneylenders. If you have a good business plan and a good credit score, you will be able to obtain a loan from licensed moneylenders.
If you have a bad credit score, you can still access an instant cash loan through collateral. The option of a guarantee can be helpful for individuals with an asset that is accepted by the financial institution. Once you complete repaying the loan, the asset will be returned to you. Should you fail to repay your credit, you will risk losing your asset to the financing institution.
A suitable financing method is important for any business to succeed. While there are many financing options out there, considering possibilities like a business loan or consolidation loan – you should not enter into an agreement that will hurt your business.
Working with the right financial institution or investor is also essential. Do your research well to ensure that you make no mistakes and grow your startup right.