Should You Finance Your Business
By personally financing your own business, you will have full control on your company.
Although, it is not bad to ask for help from other financial institutions and ease the burden of high costs in putting up a company, especially if you believe that you will succeed.
Having to finance your own business will keep you from financial stranglehold of banks and other institutions where you borrowed money from.
Most experts also believe that having loans should be your last resort in establishing or building a company. This is because if the business went bankrupt, you also stand to lose personal assets like your houses and cars.
Also, there are too many paperwork and other stages you have to pass through before any bank will allow you to have a loan with them. An individual pledge would also be required by the banks, which often times took long period of time before you can actually have a hold of the funds that you will borrow.
However, if you are in dire need of immediate funds to put up an enterprise, you should know exactly what kind and how much funding you need or should you ask for help from financial institutions.
Here are several basic types of business financing options you should know:
Angel Investors and Venture Capital is one of the best financing you should look for. They offer small interest rate and longer time to pay for your loan. It is also best for small, medium enterprises (SME) since they offer $1 million or less for loans.
Commercial Banks is also good for loans. However, servicing debt can drain the profit out of a starting business. Commercial banks also, almost often, do not offer loans amounting higher than $1 million especially if it is unsecured loans.
But enterprises seeking loans less than 100, 000 can still acquire unsecured loans through a fast and simple application process, which also focus on the business owner’s personal credit history.
You can also ask financing help from the small business administration, home equity loan and credit card providers.
However, like any other business financing companies, these options also come with high interest rates ranging from one to three percent. Rather than have any of this, it is much better to go to banks in the long-run.
If none of these options fits your needs, then a personal guarantee of the business is the best and should be your last resort. By doing this, you will have a high-level of personal commitment to your own business, which can be considered by lenders the next time you apply for loans.
Also, by guaranteeing personal commitment to the business, lenders will occasionally remind you about the business and csbommitment, which could potentially give you more drive to succeed.
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