Getting The Best Financier
We have all required financial assistance at one point in our lives.You may get this assistance from family, friends, potential investors and banks. It is difficult and time consuming to choose the right source of getting your loans or assistance. Before making a decision on who gets to finance your business, you should weigh the costs you stand to incur versus the benefits you stand to gain.Discussed below are factors we ought to consider when financing our business.
It is very important that you weigh the risk involved from getting financial assistance from your preferred source.Unforeseen occurrences may affect our ability to pay our debts. We should consider the risks we put on our relationships with family and friends if we are unable to pay a loan they offer.Banks may hesitate offering funding for your company if you are a start-up, owing to the lack of credit history. Funding a new business is considered risky and because of this, banks and other money lending institutions usually charge higher returns on their investment. Weigh the risks involved in acquiring funding from these institutions before making a decision.It is important to find the appropriate balance of equity and debt.
You should also consider control of your business when choosing the right financing option. In most cases, banks and other money lending institutions cease to have control of your business once you are done repaying your loan. Investors on the other hand will continue having some control over your business until they are bought out. If you would like to continue being in absolute control of your business once you are done repaying your source of finance, it is better to acquire loans.
The cost of finance should also be considered. It is important that you ensure the cost of finance is minimized when choosing your source of funding.If you choose to finance your business through borrowing, costs you will incur include interest rates, broker’s fees and origination fees. On the other hand, when you choose investors as your source of finance, costs you stand to incur include dividends. Go for a source of funding that costs less and brings in more.
You need to look at the risks involved in both short term and long term funding before deciding on which one to use.Banks provide long term loans to be repaid over longer periods as well as short term loans which require payment after a few months.It is important to choose funding that is most favourable to you and your business.