Getting great ideas for the business is a breeze. The challenging part is actualizing those ideas and making them profitable businesses. The million-dollar question is always: “where do you get the capital to turn your idea into the most profitable business in town?” Unless your relatives are rich and ready to lend a hand or have cash in your bank, raising business capital isn’t easy. But this should not hinder you from fulfilling your dreams. Let’s dig deeper into some of the ways you can source capital for your business.
1. Angel investors
Angel investors can be a great way to acquire business funding. However, not more than one percent of beginners succeed to convince risk-averse investors to fund their ideas. Although the path might be the most suitable one, it could be challenging.
The method involves leveraging and timing the right contacts. Also, you should cultivate trust with angel investors. Give them assurance of their money back alongside their interests.
Most importantly, select an investor best suitable as your business partner. Else, you will collide in terms of business objectives.
2. Crowdfunding sites
Gone are the days when business owners used to raise capital from bank loans. Today, you can use crowdfunding as a way to raise capital. Crowdfunding entails attracting backers (a crowd of people) who are committed to lending you a certain amount of cash.
You will use the fund for whatever you want. But you should give the backers the first product/service or how-ever you agree. The person initiating the crowdfunding project should state their financial goal, though.
If enough finances are attained to exceed or meet the goal, the project is said to be successfully financed.
3. Invoice financing
For entrepreneurs and businesses in need of capital, invoice financing is another alternative. The solution is flexible and has low risks. That is why the method has gotten its popularity as a way to raise money to start a business.
However, many business owners know nothing about it. They are clueless about the concept and how it could assist them. Invoice financing is a source of business capital against your outstanding invoices.
It takes either of the two forms: discounting or factoring. These two forms make invoice financing suitable for nearly every business as long as they are profitable and collect invoice payments.
If you intend to expand your business and think about borrowing ideas, perhaps you should think of invoice financing. Here are 3 reasons why you should add it to your list – the 4th is up to you!
i) Lower risks
Since the business capital is levied against accounts receivables, invoice financing has low risks. You do not require collateral to borrow money using accounts receivable financing. This means you will not stand a chance to lose your company or home in case the business encounters some
ii) You do not become indebted
When you use invoice financing to borrow business capital, you will not become indebted. This is because you will accept the money based on the invoices that your business already owed. This is contrary to accepting the money hoping that your business will repay when it realizes profits in the future.
iii) Access to financial advisors
Invoice factoring is another way you will benefit from accounts receivable financing. Contracting with the loan provides will give you access to the funds and team that will follow your invoice ledger and ensure your creditors pay on time.
Now, how do you use invoice financing to raise capital?
i) Invoice financing and term loan
The process of receiving a term loan from a ban can take time – which you do not have. And these banks can deny these applications. Luckily, there are alternative lenders who have offered fast application processes and less stringent terms for approval. A term loan is a long-lasting solution that blends with invoice financing.
ii) Personal loan and invoice financing
Unlike business loans, personal loans have low interest rates. Hence makes it a great option for your business.
iii) Equipment financing and invoice financing
Invoice financing and equipment financing serve 2 different needs, yet common. Therefore, combining the two is a brilliant idea. This is because you will secure your company from short-term cash-flow squeezes.
iv) Line of credit and invoice financing
If your business cash is tied up in unpaid invoices, then accounts receivables financing is a brilliant option. However, be aware that the lender might charge 3 percent interest rate alongside some weekly percentage in case your creditor fails to pay. But you will certainly receive around 50-90 percent of the total amount on the invoice.
Blending invoice financing with a line of credit helps you to place your company in a strategic position because it will never run out of cash flow.
These fours ways are great but you should select the best company to lend finances based on your account receivables. Have a look at https://www.invoicefinancingaustralia.com.au/ if you want to learn more and think invoice financing could be for you.
Final thought
There is no wrong or right way to raise business capital. The most suitable source of funding for your business depends on the situation and unique needs. Therefore, you should evaluate each source of funding carefully. Also, bear in mind repayment terms, accessibility, the amount required and cost of it.
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