The potential small business owner or entrepreneur has an idea for their business They may even have the business plan on how they want to initiate that idea. But what about the resources for getting their business off and running. There are two basic methods for small business owners to get financing. One is equity consisting of borrowing for a stake in the business. The other is taking on debt by borrowing from a financial institution. How to get this financing may be as important as any other decision the owner makes. Accountant in Docklands are competent enough to handle finance issues.
Type of Business
Looking at what type of business you will have and the resources you need are the first step. There are many types of businesses, here we are to discuss two types where one is service business while the other is merchandising business. In a service business a service is being provided for a fee. If you are providing a personal service to your customers the major cost would be expenses. For example if you do house cleaning for people, major expenses would be cleaning supplies and gas and maintenance of the vehicle. Merchandising businesses sells products to customers. They buy or make products to resell to customers. If making a craft with the intention of selling it, potential costs increase including materials, how to display wares and distribution.
Equity
Equity is giving up a certain percentage of ownership of the business in exchange for cash. Sources may include family, friends and business partners and investors. This funding is meant to be long term as the people who invest have an interest in the life of the business. The main drawback to equity financing is stepping down proprietorship interest that can create big loss.
Debt
Debt is a kind of loan that should be repaid within the specific time period along with interest rate that is normally mentioned in the agreement. So, debts are considered as the major liability on company books, whereas the payment of interests are deducted from expenses made by the business.
Debt is a payment that can be made secure by seeking the guidance of bank and it is easily paid back through some regular payments, once scheduling process is done. Debt will not lessen your equity rights in your working place. The job of financing becomes difficult along with debt, one has to make pattern of payments with interest. Debt is taken in different forms and it has a specific time frame such as a construction project or purchase of equipment. If you keep good working and personal repute and you can pay back your debts then financial institutes will trust on you.
The best method of how to finance your business depends on what your business is. The best situation is one that provides balance where you can get the funding you need, maintain control of your business, and have the funds to pay back any outstanding debt. A combination of funding streams is optimal to meet your needs.