Financing – 5 Ways To Finance a New Business

If you need financing to carry out your project, there are currently various solutions to start a business. Today we talk about some of the most common, and we are sure that they will help you balance your viability plan.

Five Types of Financing For Companies and Freelancers

Financing a business project is not exactly easy. Above all, if you do not have enough savings and self-financing is not a viable option. Depending on the project and the phase you are in, there are several financing options. From signing up for crowdfunding to requesting a loan from the bank, so you can choose the way that best suits you according to your needs. Next, we will see some of the most common among entrepreneurs.

Bank Credit

Bank loans or credits are one of the most common forms of financing in our country. Banks offer various options, depending on the interest rate, the repayment period, or the grace period. If you decide to opt for this type of financing, you must analyze all the variables very well since you will have to repay the credit whether you are successful or not.

Another option that you can turn to is microcredit. This type of loan is granted only to people with a lower level of resources and who do not have enough collateral to access credit. In general, they can go up to 25,000 euros.

Factoring

Factoring is also a good alternative to funding. It consists of the assignment of the collection rights of the pending invoices to a specialized entity, and, in exchange, the company immediately obtains the money from said operations.
In this way, the bank or financial institution manages the collection of invoices, assuming the risk of the operation and allowing the company to obtain liquidity. In addition, outsourcing the collection management allows the company to direct its efforts and resources towards more relevant tasks for the growth of the business.

Debt Financing

Another way to start your dream business is via debt financing, which is the process of loaning money from banks or institutions. There are different advantages of getting a mortgage to start your enterprise, but one key factor here is that the interest you pay on debt financing can be claimed as tax deductions under your business expense. While this may require more paperwork and background check, this is the most secure way to acquire the initial investment to start your business.

Crowdfunding

Crowdfunding, also known as crowdfunding, is a form of collective and collaborative funding, bringing together the entrepreneurs who need funding with potential investors interested.

Normally, these investors or ‘patrons’ usually make small contributions, but very numerous, since many people can contribute in exchange for rewards, shares, or participation. But crowdfunding is not only useful for raising funds; it is also a very interesting marketing tool and serves to test the business model.

Business Angels

The Business Angels are private investors, usually entrepreneurs, besides capital, who also contribute their knowledge and experience to guide the project and get future results. In these cases, financing can reach 250,000 euros, so it is expected to see a return on investment in approximately five years.

Another financing option is much like venture capital or venture capital, although in this case, the operation is performed through Venture Capital Companies (SCR). These companies usually invest in startups with innovative projects and high-risk potential in exchange for a percentage of the company

Subsidies or Public Aid

Another means of financing is to resort to subsidies and aid that the public administration makes available to entrepreneurs. Normally, to access these aids, it is necessary to meet a series of requirements. Some of the most popular are an aid for self-employment, for young people under 40 years of age, women entrepreneurs, and innovative companies.

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