How To Invest Money In A Mutual Fund

Top Sources to Get Funding for Your Business

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America has always had a unique reputation as a nation of entrepreneurs. Nations around the world look up to us as the nation where everything is possible. As an example, Silicon Valley is replete with the story of the immigrant entrepreneur who starts a tech company that makes it big. The problem with fulfilling your entrepreneurial dream is that you might have no idea where to get funding for your business.

Getting business capital is essential because capital, along with labor and land, is an essential factor of production. Indeed, many small businesses around the country fail because they are under-capitalized. That is not the only reason that small ventures fail, but it's one of the avoidable ones.

Many new businesses require a capital outlay to cover fixed costs such as plant and equipment, industrial licensing, or product-related research and development. Business capital funding allows you to carry out operations using external funds until the business matures to the point where it generates enough funds to sustain itself.

Government Funding Sources for Your Business

Did you know that you can get funding from the government for your business? Business funding tends to have some of the lowest costs in terms of interest, but you will need to jump through a few hoops to get it. In fact, for many businesses, it is downright impractical, because the government is only interested if your business is in an industry that is seen as strategic. In addition, special government initiatives may open the window to government financing, but, again, you will have to ascertain if you qualify.

Two broad categories of government funding exist: federal funding as well as non-federal funds. You can search for federal funding on the Catalog of Federal Domestic Assistance (CFDA) website as well as the US government's Grants website. Non-federal programs offered by individual states will typically be advertised through the various state houses as well as your local chamber of commerce.

Funding Your Business Through Issuing Equity

You can also look for business funding through bringing on one or more equity partners into your business. An equity partner makes an investment in your business in exchange for an equity stake.

For example, an equity partner can purchase, say, a 10% stake in your business for a $500,000 investment. The actual amount of the investment and the share of equity the new partner gets varies widely depending on your negotiation.

If you have a highly profitable business where the investment represents low risk for the investor, you can afford to dole out less in equity. If, however, your business venture is highly speculative and there's a heightened risk of the investor losing their principal, then they will demand a higher share of equity. The more you can prove the viability of your business, and that you have a proven business background, the easier it will be to raise equity funding.

The Best Business Funding Sources

Another excellent business funding source is financial institutions. Financial institutions include banks, building societies, community trusts and local investment trusts. Banks comprise a broad market that makes their profits on issuing loans at interest. True, banks will typically engage in a truly diverse range of activities, but issuing loans from deposits is one of their bread and butter profit centers. This puts you and your business in a good position, but only if you have good credit.

If you are completely new in business, it will be harder to convince the banks to take a risk on you. You might have to put up loan collateral in the form of personal property such as a car or immovable property. The great, big advantage to bank loans, however, is that the interest cost could end up being far cheaper than giving up part of your business equity. This, alone, makes business loans from banks and financial institutions perhaps the best source of commercial funding for your business.

Business Acquisition Funding

If you need a huge sum of money, say, to fund an ambitious expansion plan, you might have no option but to seek a merger or acquisition. In a merger, you and another business combine into one entity. If you are merging with a business with lots of free cash flow, the combined entity can then reinvest those cash flows into your ambitious expansion plan.

If, on the other hand, your business gets acquired by a huge corporation, you will typically get a huge windfall in cash and stock options. If you stay on in your position at the acquired business, you can be responsible for helping chart the future part of the company. The business, as a unit of a much larger business, will have access to the parent company's much higher funds in order to invest in its operations.

How To Invest Money In A Mutual Fund

Source: https://www.life123.com/article/top-sources-to-get-business-funding-for-your-business?utm_content=params%3Ao%3D740009%26ad%3DdirN%26qo%3DserpIndex

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