Being an entrepreneur, you know how difficult it is to finance your business. You may need hard cash to get your start-up enterprise off the ground, expand the scope of business operations in the market or get through difficult times. In fact, experts specializing in this field say the lack of adequate funds is the primary reason why many businesses become bankrupt. They explain the nature of your business dictates the mode of finance you should opt for your organization.
George Ammar– How to finance your business?
George Ammar is Certified Public Accountant and former Chief Financial Officer of Resilience Capital Partners LLC. He says it is possible for you, as an entrepreneur to choose the following 4 important ways to finance your business:
- Invoice Factoring
In this mode of finance, you actually sell your business’ accounts receivables to invoice factoring company in order to get instant cash to meet the needs of your organization. As an entrepreneur, you have a number of reliable yet slow-paying customers who owe your money for the products you sold them. While you know that they will pay you after a few months, you need money at the present moment to purchase inventory, meet certain expenses and pay your staff. In such a situation, you can approach a reliable invoice factoring company who will evaluate the creditworthiness of your account receivables. They will then pay you a sum equivalent to 90% of the book value of account receivables after deducting their remunerations. You may even be liable to pay the expenses they incur for recovering the amount from your customers.
- Equity Crowdfunding
This form of financing is very popular with entrepreneurs who have a great idea but do not have the money to make it a lucrative commercial venture. In equity crowdfunding, you invite people from diverse backgrounds via a social media networking platform on the internet to invest their money in the organization. In return you offer them a share in your organization and profits you earn if your idea turns out to be a success. It is similar to investing your money in the equity shares of a company.
- Venture Capital
In the case of venture capital, financial institutions provide funds to start-up entrepreneurs whose businesses have a high-growth potential but are very risky. The officials of such organization focus on the specifics of their clients’ establishments and give advice on whether their products have the potential successful in the market. They also provide proper guidelines on how such business proprietors should sell such products to the public.
Businesses that carry out groundbreaking research in the field of science and technology are eligible to get grants from the Federal Government. United States Small Business Administration provides such funds to entrepreneurs of such organization under their ‘Small Business Technology Transfer’ programs.
George Ammar says these 4 ways can help you get the money you need to operate your business. However, you need to understand each of these modes has a specific set of terms and conditions that you need to be aware of before opting for suitable one. After all, you need to take into account the risk factor of such a decision.