Some Effective Ways to Raise Funds in Order to Run your Business

Some Effective Ways to Raise Funds in Order to Run your Business
Some Effective Ways to Raise Funds in Order to Run your Business
June 1, 2016

Even though running or setting up a small business possesses a lot of benefits long term, there is the dire need to work hard on the business most importantly at the early stages. A major challenge you might face is insufficient funds or cash to have the best start-up possible. In fact, without a perfect business history, it is very unlikely national financial institutions will be granting your business loans. This leaves every small business owners with the best option of SBAs.

However, before applying for an SBA, it is important to understand the different types and sources of loans available to you based on your feasibility and business requirements. Outlined below are some major ways by which you can generate funds to run your business.

Read also: Merits and Demerits of Purchase Money and Non-purchase Money Loans in Short Sales

Trade Credit can open many opportunies

Trade credit provides you with the opportunity to buy raw materials and different business tools on credit from various suppliers. It is usually available for a period of three to six months as a sort of short-term financing. This option is very ideal for developing funds.

A business can become qualified for trade credit as soon as there is an increment in the sales and production of your goods. Eligibility is also evident once the volume of purchase increases to a reasonable extent.

Read also: A Cash Business Loan might Just be Perfect for a Working Capital

Secure Financial Support from Commercial Banks

You can secure a medium-term finance support from commercial banks based on your assets or collateral security. With this finance option, there is no need to apply any legal protocol in order to secure funds safe the assets’ mortgage. This financial support provided by commercial banks is most ideal for the improvement of a company’s assets.

Bank Overdraft may help

Overdraft is a type of agreement with a bank that enables you to overdraw funds from your active bank account to some particular limit. Overdraft option can be used against life insurance policies, assets, fixed deposits etc. In any case, keep in mind that overdraft interest rates are somewhat high contrasted against bank deposits’ interest rates.

Read also: What You Never Knew about the Small Business Administration Loans

Cash Credit

Cash credit might be ideal for you in the event that you qualify for all requirements for short-term financing. It enables you to gain advance money from financial institutions on particular intervals within certain time frames. This option can be utilized against your saleable assets like government bonds.

Factoring can be an alternative

Factoring is another option in case you intend to raise funds by selling your A/R. It is mostly considered to be an alternative for asset-based financing and can provide you with funds at any point in time. Try factoring to kick off your business as it assesses a business’ financial solidity, not an entrepreneur’s creditworthiness.

In any case, to obtain these loans, you will need to submit collateral as shares, stocks or mortgage on the properties of your entity.

Read also: Looking for Ways to Finance Your Company: Try Asset Based Lending

Article highlights

  • Setting up a small business requires hard labor on the business at the early stages.
  • Without a perfect business history, it is very unlikely national financial institutions will be granting any business loan.
  • Both unsecured and secured SBA loans are available for every eligible small business owner.
  • Trade credit provides you with the opportunity to buy raw materials and different business tools on credit from various suppliers.
  • A business can become qualified for trade credit as soon as there is an increment in the sales and production of your goods.
  • You can secure a medium-term finance support from commercial banks based on your assets or collateral security.
  • Overdraft is a type of agreement with a bank that enables you to overdraw funds from your active bank account to some particular limit.
  • Cash Credit enables you to gain advance money from financial institutions on particular intervals within certain time frames.
  • Factoring is another option in case you intend to raise funds by selling your A/R.
  • High-esteemed financial institutions normally offer business loans for a maximum period of twenty five years against sanctioned schemes or projects.

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