Weigh The Costs And Concerns Of Company Finance Options

Do you have an idea for a new business? That’s fantastic, but don’t be fooled by the blogs online. You can’t start a business with nothing in your pocket, and you certainly won’t be able to make it successful. Instead, you need to make sure that you do have some money to spend on the set up of your company. There a few ways to fund a business set up, and we have discussed these before. However, now it’s time to look at the advantages and disadvantages of each option. This is the most practical way to know which financial plan is right for your business venture. We’ll start with a popular modern choice.

Is Crowdsourcing The Way Forward?

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There are plenty of different crowdfunding sites online these days to choose from. You might try Kickstarter, or you could even set up a go fund me page. It’s possible to look at sources aimed exclusively at businesses as well because not all of them are. We’ll get to that in a minute but first, let’s look at some of the best advantages of this option.

Pros

Well, first when you crowdsource, you immediately have access to a massive group of investors. You could literally raise millions for your business in a matter of days, and that’s not even the best part. The best part is that the money is completely spread out divided into multiple investors. This means that the risk is drastically limited. You won’t take on any risk because investors or funders are more than happy to receive an incentive such as a free first order.

Another benefit of crowdsourcing is that it can bring you a lot of media attention. If your business idea generates buzz online, you can get the support you need. This, in turn, will help you gain more money for your venture. It all sounds great, but it might be a little too good to be true.

Cons

There are a couple issues to contend with here. First of all, you’ll be vying for attention on a massive market and funders are often general consumers. They are eagerly tempted by things that seem bigger or more interesting than what you might be offering. In other words, the most sensible ideas might not win out. You might need to razzle-dazzle them.

Crowdsourcing will also only work if you can gain attention. This means that you really already need a large, stable following online, willing to support you as a new business entrepreneur. Finally, if you fail to make money you, need you won’t get any funding.

What About A Typical Business Loan

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Similarly to crowdfunding, there are various sites online that can provide you with business loans. From banks to building societies and private lenders the market is wide open for this type of financial transaction.

Pros

First, the customer is king here. That means that you can get the exact loan that you want and make sure that it provides what you need. You also won’t need to rely on reaching a certain target as is the case with crowdfunding. That means that you have more control here.

On Top of that, you can get loans for a variety of different ventures. If you can dream it, you’ll be able to get the money you need to do it, and you’ll be trusting professionals. In other words, you won’t need to worry that the money won’t ultimately come through.

Cons

The only really issue to contend with is that interest rates can be high. You must make sure that you can afford to pay back whatever you borrow and ideally repaying should be easy. In other words, don’t borrow more than you can afford.

Borrowing From Someone You Know

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Alternatively, you might turn to friends or family members to help get your company off the ground. Is this the right option?

Pros

There is a possibility that you won’t face any interest rates and you’ll be getting into business with someone that you know.

Cons

It’s the same as the pros, you’ll be getting into business with someone you know. Paying back a loan to friends and family members isn’t fun, and it can be rather awkward. Particularly, if they constantly ask for that money back. It can strain your relationship and even cause friendships to end.

On top of this, while it might start as a friendly loan, you have to think about what could happen if their financial situation suddenly changes. You might find that they need the money back faster than you can provide it.

We hope you see now that there are advantages and disadvantages of each option and that you are able to make the right choice for you.

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