To grow your business, you need money. To move forward, investments are required. Examples include human resources, product development, marketing, and technology.
If you need funding to seize an opportunity, you have several options. This article provides an overview and identifies which form of corporate finance is best for your company.
1) Formal Investment Round
You can open an investment round as the next step in your plan. Investors then have the opportunity to invest in your company under agreed-upon terms. Investors often have entrepreneurial qualities, and you can grow further based on the experience and advice of the investor. In return for capital, investors often ask for control. If you want to maintain control of your company, there may be better ways to obtain capital.
2) Trade Credit
Trade credit is flexible. Trade credit allows you to access a large amount of money on an ongoing basis. You decide when (and how much) of the money is withdrawn. You pay interest only on the amount withdrawn. Once repaid, the credit remains and can be withdrawn again. In this way, you always have funds available for immediate use when you need them.
3) Crowd Funding
Crowdfunding allows you to get money from the crowd. This group can be customers or people interested in supporting your efforts because they want to use it in the future. If a large group of people invests a few euros, you can quickly get a large sum of money. How you set up your crowdfunding and thank your supporters is up to you. If you are investing money in a new online platform, for example, you can give your backers free access when they are ready. Are you developing a new product? Then you can give away the product or accessory. There are all kinds of crowdfunding platforms where you can register your project
4) Loan From a Bank
You can get a loan from a bank for your company. When you take out a loan, you sign a contract agreeing to specific terms and conditions. For example, there will always be interest on the amount that still has to be returned. The size of the interest rate is often determined by the amount of money needed and the repayment speed. With a loan, the total loan amount is received in a lump sum in a bank account. Thereafter, the loan is repaid in fixed monthly amounts until it is fully repaid. Bank loans are helpful when you want to make a specific large investment at once.
When you provide a product or service to a customer, he or she must, of course, pay you. Even if you send them an invoice, they often have to wait weeks or months for the money to be deposited into their bank account. With factoring, you receive the amount of your invoice immediately. Thus, you do not have to wait for your money. You can invest the money you earn directly into your business.
6) Venture Capital
Venture capital is private financing provided to companies or entrepreneurs with long-term growth prospects. Wealthy investors, investment banks, and other financial institutions usually provide it. It has developed in the modern industry with multifaceted players that emerged from the hackneyed business model at the end of World War II and have played a key role in promoting modernization.
7) Friends and Family
Borrowing money from friends and family is another way to finance your small business. There are risks, though. A loan requires a formal loan agreement unless it is a voluntary donation. The agreement should clearly state the interest rate and payment schedule.