Types Of Business Funding
When it comes to funding for a business, there are different types of business funding and each one depends upon what stage a business may be in or at. For some these types of funding may be required to start off a business and for others these types of business funding may be necessary to keep a business afloat and/or running. There are also those types of business funding which allows a business to expand to other places and countries and these types of funding may be given by different parties- not just by the bank, but also by the government, for example.
Debt financing is the one of the 3 main types of business funding which most people take when they are interested in starting off a business. A small loan may be taken from a bank in order to be able to jumpstart the whole process and the bank, in turn, comes up with a repayment plan with the person seeking such funding (with interest) so that that he/she is then, able to pay back the borrowed amount later on. It would be a good idea to develop a bond with your banker so that he trusts that you will pay back the loan with interest.
Grants are another of the 3 types of business funding. Usually a company could apply for a grant to the government and if the government of a particular country is supportive of a project or of certain works that are carried out, then, it would be willing to give the grant to the company. It is important to come up with a good grant proposal which can convince the government that the project would be good, successful and is worth the money too. The government would, obviously, have to think before paying- they would be giving money out of the taxes that they have accumulated after all! The best part is that this is ‘free money’- you don’t have to pay back interests or the borrowed amount but that is also why it is so difficult to get these types of business funding.
Finally there is equity financing. You know how people have ‘shares’ in a company? Those are usually due to these types of business funding- people or institutions agree to give a person or business a certain amount of money to start the business or to keep it afloat in exchange for a certain amount in the company. You can take these types of business funding from your own family members as well. The main purpose of loaning such types of business funding is to be able to participate in the company by getting a ‘share’ in it. If a company is affected adversely (as many were back in 2009 due to the economic recession) then, everyone’s money is lost and that would put everyone’s wealth at risk as well but if profits are made, these are split according to the amount of money each ‘shareholder’ put into the business.
