To start a small business, you will need to invest money in it. You can get that money in a variety of ways, but being able to repay that money requires you to run your business effectively.
Here are some ways to secure business capital and avoid the risks associated with it.
Friends and Relatives: You can raise the money for your business from your friends and relatives. The advantage is that you might get this amount at a slightly lower rate of interest, with no collateral, and with flexible repayment terms.
The risk is that if you fail to pay, it will cause problems in your personal life. You don't want that — so be sure that you repay, and do it on time.
Banks: Banks will be eager to loan you the money – provided you offer them collateral. That means that the bank can confiscate your house, car or any item that you have agreed to offer as collateral in the event you are unable to make timely loan payments.
Venture Capitalists: If you are unable to get a loan from any bank, then you can approach a venture capitalist. Venture capitalists are individuals who will invest in your business if they see potential in it. They will also try to recover the invested amount with interest which will make them a profit.
The downside here is that they could become co-owners of your business or even own some to the stock in your company.
It is very important that you plan the financial aspect of your business before starting it. Sustaining power is important if your business is to survive. The vision that you have can become a reality if you have a sound financial plan.
