Business Finance

The best way to finance a business

Business and finance go hand in hand; in most cases, funding a business takes more than a withdrawal from your bank account. A business owner has many costs to consider, from startup expenses to expansion funding, and will likely have to use a variety of resources to achieve financial stability. Business finance can come in the form of private investments, government loans or corporate credit; the right business financing program for your company will provide you with the funds you need without sentencing you to a life of debt.

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Types of Business Finance

You can choose from two main financial strategies to fund your business. The first is debt finance, which involves borrowing money for your business and paying it back with interest. Bank loans, corporate credit cards and government assistance programs all fall under debt finance. The second kind of business funding, equity finance, comes from personal savings, friendly donations and outside investments. Government grants are another form of equity finance, but these are much more difficult to attain than a loan.

Equity finance is a great place to begin, as this money will not burden you with immediate debt. Many entrepreneurs try to finance a business with help from family, friends or independent financiers called "angel" investors. Angel investors are successful business figures who will help to fund your business in exchange for a high return on their investment, and often a seat on your company's board of directors. If you decide to use private sources for capital, be sure to maintain professional business relationships with your lenders – even if they are people you also have personal relationships with, like friends or family.

Small Business Finance

Unlike funding for large, established companies, small business financing can be very difficult to get. Most small business will need to obtain a bank or government loan, and some measures will have to be taken to convince a lender of your financial worth. A new small business carries a high risk for the lender, so your business proposal will have to be fine-tuned to appeal to the lender's expectations. To qualify for small business finance from a financial institution, you will need to produce records of your financial past, understand the aspects of your present finances and provide an insightful projection of your financial future.

If your credit history is blemished, don't get too discouraged: although bad credit can make it tough to secure funding, there are bad credit business loans available. There is always room for business finance improvement, so conduct some business finance research online to find a credit or financial institution that may be willing to help you out.