Business Finance and Options for Growth

One of the main reasons as to why new business ventures fail is due to a lack of financial funding to get the business venture off the ground. Many people don't realize how much opening and running a business actually costs or how important business finance is to success. If you don't research and seek out business finance you will be unable to pay for your business premises, all of your necessary equipment, your bills and your staff wages as well as any of the stock that you will need.

You also need to ensure that when you decide on your business finance that you choose the one that is best for your business. Finance comes in many different forms and can be split into two main sections; equity finance and debt finance. The definition of equity finance is money that is invested into your business that doesn't need to be repaid. This money is yours to use in return for a share of your business profit. As well as getting money invested into your business with equity finance you will also gain expertise and business contacts that are yours to use. The second main type of business finance is debt finance. This is money that is loaned to you. It is money that requires the need to be repaid over an agreed amount of time. You will have to repay the loan in full with added interest but no percentages of your shares are handed over.

Some examples of equity finance include business angels; these are entrepreneurs who invest a certain amount of money into your business. In return for the money that is invested a business angel will gain some of your shares so that they get a percentage of your profit.

An example of debt finance includes; commercial bank loans. When most people think of startup business finance the first place that comes to mind is their bank even though banks can be wary about lending money to new businesses as there is fear that the monthly repayments will not be kept up-to-date.

Although with debt finance you have a lot more options open to you with ways of lending money, the option of equity finance is still more favorable with new businesses as a private investor will do everything that they can to ensure that your business is a success.

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