What Solutions To Finance Your Business?
Solutions To Finance Your Business : During its creation and throughout its existence, a company may have financial needs. These can be temporary or long-term, they can also be substantial. To deal with this, several solutions exist. Personal contribution, bank loan, factoring, crowdfunding, discover all the options available to professionals.
The Personal Contribution
The personal contribution is in a large majority of the cases the first source of financing of the companies. During the creation of the company, the personal contribution constitutes a very useful basic capital. This allows you to meet the first expenses and to launch your activity. This contribution is very important because you do not pay interest on it. It is also very well seen by investors and your collaborators because it shows a real commitment to your project.
The personal contribution can also include the financing of your relatives. These sums are sometimes called “Love money”. Investment from family or relatives can take many forms. It can be a family loan, a donation and sometimes even an equity investment. It entitles you to tax benefits including a tax reduction.
Professional Bank Credit
If it is impossible to bring together a personal contribution, or to complete it, it is possible to contact a bank or a financial institution to take out a loan (see this free comparator ). This financing solution is widely used. However, it has some constraints. The first is that it can be difficult to obtain the expected sum. You have to win the trust of the bankers. To achieve this, you need to build a strong case.
This file must include all the information on the borrower and his associates, namely his identity, his marital status, his training and his professional experience. You must also present your project, which must be SMART:
- Temporally defined.
Borrowers must also prepare a business plan. This document is a form of summary that allows an entrepreneur to present his project. A business plan must be precise and easy to understand for future investors. This document must provide information on the profitability of the project.
Participatory Financing (Crowdfunding)
Participatory financing, also called crowdfunding, is a financing solution that enjoys great popularity. This contemporary financing makes it possible to raise funds quickly and test the popularity of the project.
In the context of crowdfunding, you have to seduce a donor so that he can provide you with financial support. In return, he can benefit from exclusive products and services. Most often, crowdfunding is rewarded with goodies. But several forms of compensation exist.
Participatory Loan (Crowdlending)
In the same spirit as crowdfunding, there is participatory loan or crowdlending. This crowdfunding is a loan. Concretely, this is an operation called Peer-To-Business (P2B). The principle is simple: an individual can lend money to a company. It can be a loan with or without interest. In any case, no guarantee is requested.
Factoring is a financial solution for businesses already in operation that need cash. The principle is simple, it can sell their claim to a financial institution called a factor. He pays the bill directly. It charges a commission and a contribution to the guarantee fund. Then, the factor takes charge of the debt, in other words, he gets paid. It manages reminders and any recoveries. This solution is not only intended for companies in difficulty. It represents a real administrative solution to save time.
How To Choose The Right Financing?
Choosing the right financing for a business can be difficult. Indeed, each solution has advantages and disadvantages. Moreover, not all solutions are possible for a company. Thus, during the creation, the professionals can turn to the personal contribution, the bank or participative loan, or the participative financing. A company already in operation can opt for all the solutions.
In all cases, companies must imperatively present a solid case to convince investors whether they are professionals, individuals or even banking establishments.
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