Question

Essay 400-600 words “Alternative ways of financing” 

Answer 1

Some of the ways to finance a business are:

1. Bank Loan

The easiest way to finance your business is to take a bank loan. Almost every bank offers this facility may it be on higher interest rates or lower interest rates.

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2. Credit Card funding

Funding your business with credit card is an option. If used correctly, it can increase your cash flows to the greater level but if used irresponsibly, you may not even get credit in future ever. You may even take credits from different banks at the same time if you have a good cibil score. That is why it is important to use your credit card accurately and efficiently. If you are confident about your profit margins, you can opt to apply for a business credit card as long as the terms are favorable to you.

3. Crowdfunding

A crowdfunding site can be a effective way to raise money for a small business. But this isn't about long-term funding. Rather, it's supposed to facilitate the asking for and giving of support for single, one-off ideas. The crowdfunding sites allow businesses to fund small investments from several investors.

4. From Family and Friends

Friends and family remain the most common source of financing for small businesses. Though this sounds easy but it is actually a delicate matter that needs to be addressed with proper care. In return, you can always give them a share of stock of your company.

5. Microloans

There are private firms and nonprofit groups that provide funding to some sectors such as small businesses or startups. They help them with no formalities that banks do and it’s easier to take funding from them. They offer smaller loan sizes and usually require less documentation than banks. There are a many micro lenders that are out there and they often charge slightly higher interest rates for loans than banks.

6. Grants

Some businesses may receive grants from the government. The SBA offers grants through the Small Business Innovation Research and Small Business Technology Transfer programs to those who are focused research projects.