Entrepreneurs can go for different types of sources to get finance to expand their business or to establish new business. There are some common sources of business capital such as loans from friends and relatives, personal savings, loans from financial institutions like banks, or credit unions and assistance from investment clubs or venture capital firms. But these sources are not available for some business people or some times these are available with restrictions or provisions. It is tough to meet these restrictions. In such cases entrepreneur has an option to get many non traditional financing sources to get money to satisfy their needs. Those are:
a. Selling assets: Personal or business assets are sold by some entrepreneurs to get money to open or expand their existing business. And only non essential inventory and equipment should be sold. But before doing this entrepreneur should refer whether the resulting income is enough or not. But some times it is not suitable for entrepreneurs who have already established the viability of their firm and they may want to expand the business but they can get capital from another sources.
b. Borrowing against the cash value of the life insurance: There is an option to borrow against the policy to those who have a whole life insurance policy not term insurance policy. Policy holder can borrow the money up to 90 percent of value of the policy. Usually interest rates on these loans are not beyond limits. At the time of loan on the policy if policyholder dies insurance company reduces the benefits.
c. Second mortgage: Financing can be got by some entrepreneurs taking second mortgage on their home. Though it is risky but it provides two advantages such as interest rate on this loan is lower than unsecured loan and interest is tax deductible on mortgage.
d. Other sources: Financing is obtained through licensing or franchising by some entrepreneurs. Originally money can be got through selling the rights to unique product to other companies or business. Other small business firms can make partnerships or form alliances with other firms to get finance.
a. Selling assets: Personal or business assets are sold by some entrepreneurs to get money to open or expand their existing business. And only non essential inventory and equipment should be sold. But before doing this entrepreneur should refer whether the resulting income is enough or not. But some times it is not suitable for entrepreneurs who have already established the viability of their firm and they may want to expand the business but they can get capital from another sources.
b. Borrowing against the cash value of the life insurance: There is an option to borrow against the policy to those who have a whole life insurance policy not term insurance policy. Policy holder can borrow the money up to 90 percent of value of the policy. Usually interest rates on these loans are not beyond limits. At the time of loan on the policy if policyholder dies insurance company reduces the benefits.
c. Second mortgage: Financing can be got by some entrepreneurs taking second mortgage on their home. Though it is risky but it provides two advantages such as interest rate on this loan is lower than unsecured loan and interest is tax deductible on mortgage.
d. Other sources: Financing is obtained through licensing or franchising by some entrepreneurs. Originally money can be got through selling the rights to unique product to other companies or business. Other small business firms can make partnerships or form alliances with other firms to get finance.
No comments:
Post a Comment