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Common Sources of Finance for Business Owners

The hardest part for a business owner is to find the funding that it needs to keep the business afloat. Money is needed not just for administrative matters, but also for buying inventory and other things. It’s obviously difficult for the business owners to keep things running smoothly mainly because they don’t have an endless supply of funds. In general, the initial contributions to start a business come from its founders or its immediate surroundings. However, as a venture moves forward, it can find other ways to finance itself to grow.

The main sources of financing for a growing business are:

Individual investors

They are usually called “angel investors” who bet on the development of a business, even in its early stages, with the incentive to have a quick and very profitable recovery of your money if the business thrives. They tend to look for businesses in sectors that they know or have high growth, such as computer science or biotechnology. Max Funding is an Australian funding company founded by a group of investors in 2008. It is one of the most reliable Financial/Commercial Funding Institutions across the country with a certifiable track record of satisfied customers. Max Funding was established by a group of investors in 2008 and serves industries including, retail, medicine, automation, construction, restaurants, manufacturing, beauty, mining, education, etc. Till date, the company has managed to help more than 8,500 SMEs in Australia operating in over 130 sectors.

Subsidies or non-refundable contributions

For certain lines of business, there are tools, usually from public institutions, that provide money to enterprises that you want to promote. As they are funds that should not be returned, they are usually relatively low amounts and require a specific purpose, such as paying advice, setting up a stand at a trade fair, or buying certain equipment. They can act by industry, province or region, or type of enterprise. Some awards also give prestige, in addition to money. Financing a venture is never easy. But there are more sources of money than one usually thinks.

Personal loans

If the growth opportunities go faster than the formalization or consolidation of the business, you can get a line of credit in a personal capacity and invest that money in the business. The contributions of the entrepreneurs themselves (and their friends and family) are usually the first engine that starts a venture until it can show its performance in the market.

Credit with suppliers

The difference between collection and payment moments can be an important source of financing. In general, it is necessary to negotiate agreements with suppliers to formalize this commercial credit. It can be implemented in various ways, including deferred checks or delivery of goods on consignment.

Customer advances

If with your growth you boost the development of your customers (for example, if you strengthen yourself as a supplier or create a product that benefits it) you can reach an agreement to receive money from your own buyers, on account of future sales.

Bank credits

Businesses that have already passed the initial phase and can put together a solid presentation of their present activity and future projection, can obtain special credits for SMEs. In general, it is necessary to present a business plan with a focus on numbers and, in some cases, show specific destinations in which the money will be used (for example, there are lines of credit for machinery, for expansion of facilities or for utility vehicles).

Taking funding from another business might seem like a good idea, but there are a host of other factors that you need to consider. For starters, as a business owner, it’s recommended that you evaluate the terms and conditions of the loan before you proceed further. You have to make sure that you are getting a suitable deal. For instance, if a business asks for equity and you end up giving them a significant amount of your equity for a small price, it is actually going to hurt your business in the long run. That is one of the main reasons why it is so important for business owners to evaluate their requirements carefully before making a decision. Otherwise, you are only going to end up losing out.

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