Business financing options


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Business financing options

  1. 1. Business Financing Options
  2. 2. <ul><li>The best way of financing the starting of a small business is with the help of bank loans. </li></ul><ul><li>Before asking for any loans to the bank, the borrower has to present a good business plan which is very helpful for bank so they can decide whether to give or not to give the loan to the business. </li></ul>
  3. 3. Bank-term loans <ul><li>Bank-term loans is the basic way to finance a starting business. They typically carry fixed interest rates, and monthly or quarterly repayment schedules and include a set maturity date. Bankers tend to classify term loans into two categories: </li></ul>
  4. 4. <ul><li>Intermediate-term loans: Usually running less than three years, these loans are generally repaid in monthly installments from a business's . According to the American Bankers Association, repayment is often tied directly to the useful life of the asset being financed. </li></ul>
  5. 5. <ul><li>Long-term loans: These loans are commonly set for more than three years. Most are between three and 10 years, and some run for as long as 20 years. Long-term loans are collateralized by a business's assets and typically require quarterly or derived from profits or cash flow. These loans usually carry wording that limits the amount of additional financial commitments the business may take on (including other debts but also dividends or principals' salaries), and they sometimes require that a certain amount of profit be set-aside to repay the loan. </li></ul>
  6. 6. <ul><li>The possibility a bank gives a loan is abundant but highly differentiated. The degree of financial strength required to receive loan approval can vary tremendously from bank to bank, depending on the level of risk the bank is willing to take on. </li></ul>
  7. 7. <ul><li>For expanding or growing a business I think the best choice is Asset-based loans, although is very risky I think if the business wants to expand rapidly it has to used its assets and with a good management the business will succeed. </li></ul><ul><li>Asset-based loans are usually from commercial (as opposed to banks) that are offered on a revolving basis and collateralized by a company's assets, specifically accounts receivable and inventory. </li></ul>
  8. 8. <ul><li>For a business to maintain itself during difficult times and depending on how hard is the situation I think a institutional venture capital will work. </li></ul><ul><li>This type of funding includes venture capital from professionally managed funds that have between $25 million and $1 billion to invest in emerging growth companies. </li></ul>