One of the points to consider in all business projects is financing and its sources. And one of the most common questions we face is: Should I use only funds from the company’s partners or should I use external financing to grow?
That is, obtaining funds through loans, issuing bonds, or any other instrument that is useful for obtaining them.
In this article, you will learn everything about business financing, lending investments, before starting a project. We will explain their definition, the different types and we will review the best options depending on how your company is.
What is funding?
Financing is one of the most important points when you start any business project or when you want to grow once formed. We define it as the way the company obtains resources and/or money to carry out various projects in mind. To do this, it is essential to know in advance how many resources and money we have and how much we need to achieve certain goals. Lack of initial planning can lead to the downfall of a business. It is important to check the money advisory service reviews before you begin.
Bank financing
Companies can use bank financing to have a flow in the day-to-day running of the business or finance the acquisition of assets necessary for the operation of the project. There are a multitude of financial instruments, but we could classify them into two broad groups: financial instruments to finance the working capital of the day-to-day running of the project and to finance assets related to normal operations.
Start-up capital
Start-up capital is a type of stock offering in which an investor acquires a part of a business or company, investing at an early stage. The support of a business plan is realized in the creation phase and until it manages to generate its cash flow or is ready for new investment.
Start-up capital involves a higher risk for the investor than more traditional venture capital financing, as the investor cannot see any business reality already in place to assess their financing.
Crowdfunding
This form of financing is one of the favorites of companies, startups, and projects that contribute to the common good (profitable or not) or whose idea is innovative to win over a wider audience and make them participate in it.
And it is a cooperation between different people from a network that (mainly) gathers resources and/or money through the Internet to help the entrepreneur to develop his project. Anyone can participate in crowdfunding and there are different pages to channel these actions, but it is important to know that in no case do you become an investor in the project.
Public funds
They are used to generate business models and project development; that is when it is more advanced than a mere idea.
Within this classification, we can subdivide it into two types: period grants, which are those that should not be returned and are usually intended to finance a particular item in the project; and public loans which, like any bank loan, must be repaid, but on more favorable terms than those chosen through private entities.