Let’s look at the different ways we have to fund the creation of a new business, ie, the different ways we have to find money to invest in the creation or implementation of a business:
The most common way to finance the creation of a new business is using its own capital, ie, using the money we may have, either getting it from our savings, or any other personal source, for example, using the credit cards, selling personal assets, etc..
This type of financing is the most recommended as we are not required to pay interest or to have to pay back.
It is always advisable to start a business, using its own capital, at least at the stage of creation, and ya later, when the business begins to grow, just start looking for external sources of funding.
If however, when our equity is not enough, you can combine it with other types of financing discussed below.
If we do not have enough equity, a good alternative to fund the creation of a business is to borrow money from family, which is very likely to accept if they are aware of our ability and responsibility.
The advantage of this type of financing is that usually we are not obliged to pay interest (even on our own, as utilities begin to be, we can reward them financially confidence in us) and we are not required to have to pay it back so readily, allowing us to work quietly in the creation of our new business, without being pressured by having to pay it back so quickly and on a deadline.
An alternative to borrowing money from family is to solicit money from friends. The usual practice in this case is that the time period for refund is less. The disadvantage of this form of financing is that we can get friendship deteriorate if we can not pay back the loan within the agreed timeframe.
Another form of financing for the creation of a business, borrow money from the bank.
This type of financing is somewhat difficult to access, since banks typically lend only to businesses set up and market experience, not just starting business.
However, access to a bank loan to start a new business is not impossible, if you have good credit, good trade references, or an attractive business idea with a solid business plan to back it up.
Other financial institutions
An alternative form of financing for banks is to apply a credit to other financial institutions are geared to support small and medium enterprises.
Some of them are accessible to access credit for the creation of a business, but just as in the previous case, our business idea should be attractive and be supported by the development of a good business plan.
The disadvantage of this type of financing is that, unlike traditional banks, these financial institutions in the amount borrowed are small, and the cost of borrowing (interest rate) high. Research in your area by well known organization.
This form of financing involves looking for a person who wants to share the risk of business creation, and invest with us.
It is advisable to look for a partner with the same motivations and aspirations as us.
It also recommended, is looking for a partner to invest the same capital that we, and to provide, in addition to money, other resources that are complementary to those we have, for example, experience in some aspect of the business, market knowledge, knowledge business contacts, etc..
The disadvantage of having a partner is that later may have disagreements, disputes, differences, etc., especially if the business starts to not achieve the desired objectives.
Find an investor involves looking for a person who wants to finance all or part of the investment business, and as a result will receive a percentage of profits according to the amount contributed.
The disadvantage of using this type of financing is that we have to deal with having to always pay a portion of the profits of the business, someone who invested initially and then did nothing to create or grow the business.
Is to participate in contests on business projects developed by government agencies, universities or other means, where it rewards the best business idea, with full or partial funding of the project.
If you have an attractive and innovative business idea, research on the existence of this type of competition in your area.