Ways of Financing Business.
Due to the fluctuating of market forces in the business world today it is quite important if any business makes proper arrangements in order to have positive cash flows. Remaining in the market and being able to transact business comfortably at all times is the aim of every business out there, in order to make this happen there are some factors that one needs to consider.
First of all, one has to consider the funds available in the business currently that is funds available less owners capital so as to get the funds available for investment, this will help determine what the business itself can finance. Having determined that one has also to understand the actual fixed costs of the business say maybe for about a month or so, this will help determine the funds the business is using whether making sales or not in order to run day to day operations of the business. With those facts however one has to understand that financing business cash flow will be dependent on the uniqueness of the business, maybe if the business is new, business size, business sector and so on.
Having done the above stages it now becomes easy for one to find the source of finance in order to finance the said business. Depending on the nature or need of one’s business there are some options one can choose as ways of financing his business, namely, short-term finance, medium-term finance, and long-term finance. In short-term finance is commonly used to cater for short-term and current needs of the business obviously not exceeding one year for the repayment, mostly it is used to finance repairs, and maybe taxes. Among the examples of short-term business financing is the bank overdraft, whereby the business will be allowed to draw more money than what is actually in the account, this kind of financing is easy and does not have high rate of return.
For those businesses that would like to service the financing for a maximum of about five years and below, they may opt for medium-term financing, this kind of financing is commonly used to finance in acquiring new machinery or business re-engineering. Commercial banks and other financial institutions are the best examples of this kind of funding that is medium term financing. In light that for a higher chance of the financier to get his fund back they must check the creditworthiness of the client, however, there are some changes in the financial market that there are some institutions that do not necessarily require that. In order for one willing to take a loan or business financing yet he has no good record of creditworthiness he should consider visiting the said financial institution and will be advised accordingly on how is that possible.