This article is about The Concept Of Business Funding. Funding is required by all business firms. Big or small, the difference only lies in the total value of the funds required. While a small business firm would be happy with a loan of somewhere around $50,000, an airline company would have a demand of at least 5 times this value. For a finance agency, meeting both the loan requirements may be feasible, but what fuels their choice is the capabilities of the company to convert the loaned amount into gains so that better returns may be received.
While a business firm would want the amount to increase their business or meet the current financial needs in order to keep them operational, the investor would lend the money with the sole motive of getting interest amounts on it.
Walking into a finance firm’s office would not get any loans sanctioned. There are certain protocols that need to be followed at all times. The business plans have to be bought forward which would then be followed by a question answer session on any queries that come into the minds of the experts hired by them.
The main points of this meeting is to analyze the total finance requirements, how the investment is going to be used and the total interest amount the investor can expect from the profits that are going to be made in the future. A business plan that meets all these requirements is known to be well crafted and fortunately for you, most of them are not which greatly reduces the competition.
The business plan should contain in depth analysis of the future prospects in 3-4 year brackets which make it easier for the experts at the finance firm to understand. In what duration would the total amounts be repaid and most importantly, in what amounts would it be paid.
If it is a grant that you are pursuing, most of the these points would not be applicable, however, the requirements become sterner as the amount would not be repaid which would mean, them going to the one who also has a social cause attached. Grants are majorly provided by the state governments or capitalists who aim to bring about a change in the general outlook of the society.
If it not possible for the company to undertake the tasks mentioned above, it is for the best to avoid the debt funding concept and work in the direction of equity funding. Equity funding is when the finance is taken from the private agencies.
This mode is a bit more relaxed and getting a loan is easier. However, with the ease, the interest rates become higher. Another option is to meet the requirements from personal savings or borrowings from relatives, customers and friends. This mode is based on trust and goodwill which would mean virtually no interests but at the same time, all the more difficult to get if the total amounts are high.
Always remember not to get disheartened if the loan is not approved in the first go. Keep trying. What may not be good for one company may be acceptable to the other.