What is Business Funding?
Are you planning to launch a new business? If so, you’ll probably require some type of funding to transform your idea into reality. While no two businesses have the same exact funding needs, one survey found that most small businesses start with $5,000 to $10,000. Whether you require more or less financing, you should explore the various funding solutions to get your business up and running. Today we’ll take a closer look at what is business funding and why it’s so important.
What is Business Funding?
Business funding refers to the acquisition of money or lines of credit that’s used specifically, by an individual business owner or a company, for business-related purposes. All businesses require some type of financing to conduct their operations. A retail store, for example, needs capital to purchase inventory, lease a store and cover payroll, whereas a landscaping company needs capital in order to purchase equipment and advertise its services.
Debt vs Equity Business Funding
Most forms of business funding are either debt or equity based. With the former, you take on debt from a financial institution or investor who loans you money. It typically comes with an interest rate, allowing the lender to make money from the loan. The latter is a different type of funding that involves selling equity shares of your business to an investor.
There are pros and cons to both debt- and equity-based business funding. Debt-based funding allows you to retain full ownership of your business. On the other hand, equity-based funding doesn’t require you to pay back anything. Consider both options when seeking funding for your business.
Secured vs Unsecured Business Funding
There are also other forms of business funding such as secured and unsecured loans. The term “secured” simply refers to the use of collateral to obtain a loan or line of credit, which are both debt based funding options. You place one or more assets up as collateral, such as property, under the agreement that you’ll pay back the loan according to the terms set forth by the lender. And if you don’t pay it back, the lender can take ownership of the collateral.
Different Types of Business Funding
There are more than a dozen different business funding solutions available, some of which include hard money loans, factoring loans, accounts receivables financing, crowdfunding, angel investors, venture capital, private equity, Small Business Administration (SBA)-based loans, bank loans, bank lines of credit and more.
This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.