Startups require capital to move from being a business concept into a fully fledged business operation. This move requires an entrepreneur to seek capital through various funding options available to them. Most business loans for startups require the entrepreneur to pitch their business concept to their prospective lenders in order to secure funding. Funding is important to a startup, as it’s this initial capital that enables the startup pay for incorporation expenses, inventory and marketing. There are various funding options available for startups to secure the much needed capital to carry out their business operations.
When selecting the most appropriate funding options available for any merchant cash advance startups, the entrepreneur has to first put the following variables into perspective.
• Does the startup require the funding in smaller amounts spread over a certain duration or require a one off upfront type of funding?
• According to the startups projections, how long till return on investment starts to materialize?
• In assuming risk, is the entrepreneur willing to assume risk alone or open to sharing risk with someone else?
It’s from such business funding variables that a startup knows what type of funding is best suited for its operations, be its debt or equity financing.
Debt financing entails accessing funding with an agreement of repaying in the course of a set time frame. This form of funding usually attracts some form of interest rates and has to be paid in full whether a business succeeds or fails. Bank loans are perhaps the most common type of debt funding Whereas Equity financing involves selling partial ownership of the startup, once the sale is completed the entrepreneur makes use of the money received from the sale to further their startup’s operation. This type of merchant cash advance start up makes it possible for an entrepreneur to share risk with their financier. In the event of the startup’s failure, the investor stands to lose their investment while should the startup turn up to be profitable, then the investor stands to make greater returns on their investment.
Bank overdrafts are a perfect funding option for startups because of the fluctuating cash flow that a startup is likely to encounter. This Business loans for startups simply operate by allowing a startup to withdraw cash that exceeds its actual amount held in its account to meet its daily business operations in times of unsteady revenue flow, but this money has to repay upon request or when the startup regains its regular cash flow.
Credit cards are another avenue for startup funding. For a startup seeking short term funding options, then the use of credit cards to access this funding would be appropriate. A startup stands the best chance of accessing some of the cheapest source of capital using a credit card, this is because of the special introductory rates some of these cards have to offer coupled with a window period of no interest being charged on accessed funds. Extreme caution has to be applied while using credit cards as a funding option to a startup, their misuse could be very destructive to any business.
Another great merchant cash advance start up, is factoring. Factoring makes it possible for startups to access funds that would have otherwise been tied up with unpaid invoices. Through factoring startups are able to get funds the moment the factor approves the invoice as opposed to waiting for the money to get in. Its advantage to any business is that it frees up the time that would have been spent going debtors and speeds up cash flow.
There are numerous funding alternatives for startups with each having variations from the other. In order to secure the best suited option for your startup; research, know the details from the various funding options and be advised before making a commitment.