When it comes to running a business it is very important to raise working capital in order to properly fund the company. Without working capital it’s difficult to expand the business and to obtain the necessary services and features needed to stay competitive. Due to this, it’s necessary to locate different methods for raising capital for your small business. You can read some of the best business books for advice to determine what is going to work best for you and offer you the best options for holding onto the capital.
Take out a Lien
Taking out a lien on the mortgage of the building is one option for businesses in need of immediate capital, if you own the building, or even on vehicles owned by the business. Essentially, a bank is going to give you money based on the value of the property or the vehicle. This does mean that the bank’s name goes on the title of the property or vehicle, so if you do not pay back all of the money during the given time period the bank does have the ability to repossess the vehicles or car, but this gives you working capital and it also allows you to obtain a loan for a reduced interest rate. This kind of an interest is usually far less than what you are going to find from a traditional small business loan.
Small Business Loan
Of course, although the small business loan might have a higher interest rate attached, if you default or fall behind on payments you are not necessarily going to lose the business to the bank. If you are not completely confident in being able to pay off the lien on the loan you are better off taking the small business loan. Additionally, you can obtain more financial support with the small business loan than you can with the lien, especially if you have a proven track record with your business. Most banks like to see a business that is already successful, as they know you are going to be more likely to earn money and to pay back the loan on time.
Family and Friends
One of the best ways, especially when starting off, is to obtain money and financial support from family and friends. If you have any family members with some extra money and are willing to invest in your business, this is an excellent option, as you can bring in money without having to pay interest. Of course, you need to make sure and stay on top of the loan payments, since you don’t want to estrange yourself from friends and family members because of it.
Sell Shares
You can sell shares of the business. Basically, someone is able to buy a certain stake in your business; much like an investor might do on the stock exchange. There are many ways to go about doing this, as they might receive a certain percentage of all profits, depending on the sale, or they might have some ownership rights, depending on the percentage. It ultimately depends on what all of the determining factors are when it comes to the shares and how you want to go about doing this. However, it does raise capital for your business as an individual or other investors are pumping money into the business in order to purchase the shares inside the company.
There are several different ways to go about bringing in revenue and working capital for your business; you just have to determine what works best for you now as well as down the road. The key is to worry less about immediate profit and think more about long term sustainable success.