You may have hit upon a brilliant business idea which you are sure will be a success if implemented. However, for that to happen you have to draw a good business plan – a plan which indicates how you would establish the business and the steps you would take to make it a success. Your financier’s decision to provide funds to your business may be dependent on this plan.
Financing a startup business is a big challenge for most entrepreneurs. For one, the business has no past record of success and second, the creditworthiness of a new business cannot be proved.
An entrepreneur planning a new venture can opt for equity financing or take startup Startup Business Loans . In case of equity financing, the person starting the business will receive money from the financier and in exchange he would give him a stake in the new business. The business owner can also take a startup business loan that is he can borrow money which needs to be repaid along with interest.
Unless you have drawn an elaborate plan for equity financing, borrowing Business Loans would be more practical for business owners. If you opt for equity financing, they may be complicated issues and legal problems that may surface. As the owner of your business, you may not want to dilute your share in the business. Equity financing may force you to share ownership with others. Not only that, you will also have to share the profits of the business. Moreover, you may not remain the sole decision-making authority as management control is distributed, creating scope for conflicts. If you take startup Business Loans instead, you could avoid all these problems.
It is very difficult to obtain Business Loans from banks.
Bank loans may be secured are unsecured.
Banks generally grant secured loans to startup businesses, also taking a personal guarantee from the owner. This means that in addition to the business assets, the owner’s personal assets are also at risk.
The owner’s borrowing decision will depend on the term of the loan, the interest rate charged and the fee charged by the banks.
Funds, though difficult to get, are crucial for startup businesses. Entrepreneurs starting new ventures may have to take great pains to arrange for startup Business Loans as these businesses, being new, cannot prove their credentials.