As a consultant, I have clients asking for my advice on where and how they could get funds to capitalize their businesses.
I also heard many people saying they want to go into business, but they don't know where and how to get the capital needed.
Well, there are many sources of funds, but over the years I have found out that there are sources that are easy to get money from to capitalize a business.
Below are the tried and tested sources of capital for your business, which also include not only money but goods and products for sale as well.
1.
Personal Savings.
This is the best source of capital to finance your business.
Why? Because you do not have to worry about principal and interest payments.
In the event that your business fails, you lose only the money that you have invested in, and nothing more.
If you borrow money from the bank and your business closes shop, then you will also lose your collateral, usually real estate properties or even your house and lot, since the bank will foreclose it.
2.
Personal Loans.
Borrowing from friends and relatives who have excess funds is a good way to finance your business.
Usually the loan is interest-free, although some friends charge a very low interest just to cover the opportunity loss of their money, for example, interest income had they deposit their money in the bank.
Getting personal loans means you can finance your business with the least cost.
If your profit margin is 30% per month and the interest that your relatives or friends are charging you is the usual 1% per month, getting a personal loan is a very attractive and viable business proposition.
3.
Consignment of Goods.
Not all products that your business sells need money to buy those products.
In fact, many businesses are using consignment to keep their inventory moving.
This is how consignment works: You get a company to deliver their products to you.
In doing so, you will act as the company's sales agent.
In consignment, you will pay the company for those products that are sold, like on a monthly frequency.
Not only that you will get the company's products without paying anything, but you can also use the money from the sale of their products to generate more money before the schedule of payment arrives.
It's a double win on your part.
4.
Credit Cards.
This is another good way to finance your business, since the interest-rate is rather low, compared to the loan sharks and pawnshops, which I do not recommend as sources of funds.
To get the most of your credit, make your purchases right after the cut off date so that it gets reflected only in your next month's bill.
5.
Investment Liquidation.
Selling your idle assets to raise capital enables you to start your business debt-free.
Your assets include your immovable properties like real estate and movables like cars, shares of stocks, jewelries.
Selling these properties to raise capital to finance your business is always preferable to borrowing money and paying interest on it.
6.
Bank Loans.
Banks seldom lend to a new or small business.
Usually you have to prove your worth first before a bank will consider your loan application.
These include having real estate as collateral, and your business must be feasible.
So unless you have the collaterals and have a track record in business which can be supported by financial reports and feasibility studies, a bank loan is not an attractive option as source of capital for a start up business.
It always takes money to make money, and in raising money to finance your business, the best sources of capital are those that you can generate without paying any interest or by paying the least cost and with minimum credit requirements.
This way, you can minimize your cost and maximize your profit.