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Funding a business
How is a Business Funded?
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[QUOTE="Faith B, post: 225162, member: 11591"] The first step in starting a business is to secure financing. Small business loans come in two different forms: [LIST] [*]debt and [*]Equity. [/LIST] While debt does not require repayment, equity is an option for small businesses that need additional capital. When you borrow money from a lender, you must make sure to adhere to the terms of the loan. Read this article to learn how to obtain funding for your small business. You should also understand the terms of each type of loan. [B]Main goal of loan[/B] [LIST] [*][B]The main goal of any loan is to provide capital for your business;[/B] The typical business owner can obtain debt or equity capital from banks or other financial institutions. However, it is important to consider the risks involved in each type of funding. Using the wrong type of loan can harm your credit score. Fortunately, there are many alternatives available to small business owners. [B]Here are a few of the most common methods of getting or raising capital.[/B] [*]A business can raise capital from its own operations, from investors, or from a combination of both. But raising capital from a bank is not easy, as the process is outdated, labor intensive, and the regulations are unfavorable to small businesses. Additionally, many small businesses are new and therefore, they need a five-year profile of the company in order to get approval. A better alternative would be to seek out an angel investor, which will most likely be willing to provide you with a substantial amount of capital. [*]The second method of raising capital is through external sources. This can include loans, bonds, or equity investments. The pros and cons of using these methods depend on how much return on investment a company will get from external capital. As long as you're able to demonstrate that the money you're obtaining is going to be useful and that you'll be able to repay the funds, you'll be well on your way to success. [/LIST] [B]Debt financing is another option for small businesses: [/B]It's a loan from a bank or other lending institution. You can also find private investors who provide capital. Once you have the funds, you need to apply for a loan. Once you have been approved, the bank will check your personal credit. If you've received the necessary paperwork, the next step is to get the money from an investor. You can ask a private investor to help you with the application process. [B] summary[/B] A business's financing option can be found through a variety of different methods. One of these methods is through equity. You can borrow money through debt or equity. As long as the loan is not in default, the capital will be paid back. This type of funding has a high risk of depreciation. If your business fails to pay back the funds, it will lose the business's credibility. If you can prove your credibility as an owner, you'll be able to attract investors. [/QUOTE]
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