Easy Guide to Financing Your Business

Easy Guide to Financing Your Business

Here is a brief guide offering insight on easy ways to business financing specially meant for small and midsized businesses. At present, almost everyday new businesses are getting started in New Jersey and that is the reason it is really important to know how to raise money in order to meet the expenditure well. One of the biggest needs happens to be arranging for the space but availing commercial real estate loans in New Jersey can solve the problem.
The two primary means towards business financing in New Jersey are as follows,

  • Debt Financing
  • Equity Financing

Debt financing is a line of credit or a loan that is required to be paid off within a fixed time frame. The loans are kept secured with some assets and that implies if the loan won’t be paid off within the time frame then the assets will be taken away. There are also certain instances where the loans are not backed by assets.

Equity on the other hand implies selling a part of the business, which is denoted as selling an equity stake. The best part of this investment is that there is often no requirement of paying back the invested amount and the current owner of the equity derives all the advantages, the right to vote and the cash flow related to the equity stake.

Among these two, nothing is good or bad as the financial solutions comprise both debt and equity and often it happens to be a blend of both and it entirely based on the need and the situation that which among the two solutions will be selected.

Now, let’s have a short overview on the different methods of business financing in New Jersey

Credit cards
An effective method to business financing happens to be credit cards. They are used for paying the suppliers and earn rewards, discounts and are a protected mode no doubt. The disadvantage of such cards happens to be that they remain tied to the credit score directly.

Another great source of funds includes the cash advances. High rates of interest are imposed on the cash advance limits by most of the credit card companies. They are pricey options but great options as well when serve as the last resort.

Savings
One of the best ways to finance the business is putting one’s own fund. If someone has saved money for starting a business then that is the best and the safest decision no doubt and the only shortcoming in this option is that there is always a limitation in saving money. There are times when the money is taken from home and insurance policies, retirement plans are sacrificed for the sake of business. This in some way put forth a great deal of risk as for some reason if the business fails then the entrepreneur will be at total loss with nothing to get the support and get over the loss.

Family and Friends
If it is a small business start up then the common practice often happens to be getting family members or close friends make equity investment, i.e., selling a portion of the business to them. Based on the extent of relationship you share with the person often business loan can also be asked from them. The risk in this type of financing is that in case the business fails then it might strain the relationship quotient with that particular individual. There is another problem as well as the person providing the money might turn out to be the business partner you never wanted. In this case if you choose not to listen to their opinion about the proceedings then it will again have a great impact on the relation you share with the person.

Business loans and lines of credit
There are the options to get business loans or opt for line of credit from banks. When a bank provides a loan then it happens to be a specific amount of money to be paid over a particular period of time. On the other hand the business line of credit is an option that can be taken when required and can pay at regular intervals working more or less like a credit card. The problematic aspect of this option is that the banks look for a great track record of the business as they get paid based on the business generating great cash flows. At the same time the commercial real estate loans in New Jersey can offer great solution for getting a space for the business.

Also Read:- How to Choose The Best Same Day Loan?

Purchase order funding
This is a great option for the company which is small scale but have the potential to get a large order and require funds to meet the supplier costs. It is an option in which the company sells goods at a markup price and pays to the suppliers directly and thus meet up large orders.