Funding Sources - Options To Raise Capital For Your Business

Access to funding when you need it is essential to both emerging and established businesses. So where can you find it? There are far more sources, which are far more accessible, than you may have imagined. Your capital acquisition strategy may include a combination of funding sources. It's smart to diversify, and a blend of debt, equity, and possibly grants is a great idea. Here are some options:

* If your company needs cash to cover expenses, can't wait for the typical accounts receivable cycle, and has invoices and purchase orders, then consider asset-based lending.

Potential sources include your neighborhood bank or factoring finance companies, which you can locate online by searching for "factoring" and the name of your city.

* If your company needs cash to cover expenses, can't wait for the typical accounts receivable cycle, and has a solid history of credit-card sales, then consider merchant cash advances.

Potential sources include http://Advanceme.com and other such services, which you can locate online by searching for the keywords "merchant cash advances."

* If your company needs seed or expansion capital and is willing to take on debt, then consider business loans, loans from friends and family, and microloans.

Potential sources include your neighborhood bank, the Small Business Administration, http://Prosper.com, http://TheSnapLoan.com, and http://Count-Me-In.org.

* If your company needs seed or expansion capital and has time to apply and wait for processing, then consider government or other types of grants.

Potential sources include http://Grants.gov and online searches for the keywords "small business grants."

* If your company needs seed or expansion capital and is willing to sell equity in the company, then consider angel investors, venture capitalists, and friends and family.

You can locate potential sources using online searches for the keywords "angel investors" or "venture capital" plus the name of your city.

* If your company needs to buy equipment or incur other capital expenses (such as pricey software), then consider an equipment lease line of credit.

One potential source is your neighborhood bank.

Business Franchise – How Do I Raise Funds To Buy?

Many people buying a franchise opportunity or starting a business for the first time raise funds by getting a second mortgage on their property. This method is extremely popular due to the fact that it is possible to raise funds at exceptionally favourable terms. The interest rates are the lowest in the market and you can spread payments over many years.

Many people turn to their family and friends to either provide funds. The benefit of getting loans from friends and family is that often there is no arrangement fee and interest is usually waived. The problem with this is that if you fail for whatever reason chances are you will also lose a friend and bring financial pressures to bear to someone close to you!

If people are trying to raise money from the banks and they do not have a decent credit score they can often overcome this by getting personal guarantees from people close to them. Banks now know that if there is a problem getting repaid they can chase the guarantor for sums outstanding. Again this method carries the risk of bring you into disrepute with someone close to you.

One of the benefits of buying a franchise versus starting a business on your own is that many lending institutions look more favourably at lending for franchises. The reason for this is that franchisees have a much better track record of repaying monies due then people starting their own business. The majority of franchisees are still trading after five years where as the majority of people who choose to go it alone fail!

Usually, banks will lend fifty percent of funds required for a new start up whereas they can lend up to seventy percent for people considering a franchise. Many banks have already analysed the franchises prior to the approach for funds. They know as much about the franchise as the potential franchisee and in many cases have carried out more due diligence.

Many banks have franchise managers who specialise in assisting prospective franchisees. They have already prepared guidelines to assist and advice them. They have also been trained to examine new franchise opportunities and can point out the potential and downfalls of the type of business that is being considered.

Franchise managers can assist with the creation of business plans and forecasts. They will also help in analysing the franchise fee and ongoing royalty payments. On average, royalty payments vary between ten and fifteen percent of turnover.

Usually this advice is free and fees are only payable once funds have been approved. The recommendations they give are invaluable and based on many years of experience lending monies to franchisees. Be wary of lending institutions which insist on a charge just to examine your case.

Even if the funds are present to buy the franchise, it is still a good idea to approach the banks and see how they feel about the franchise that you are considering purchasing. At this point it is probably not the time to let them know of your financial situation!

Always base your choice of a franchise, not only with regards to the money making potential but also your lifestyle. It is important to find a business opportunity that you can commit to for many years!