How should you finance your business?

If you’re an enterprising Australian, you might be considering starting your own business. It’s exciting to turn small beginnings into your primary source of income (or even a national corporation!), but in order to get started, you’ll have to find the capital. Money doesn’t grow on trees, so what are your options when seeking business finance?
Commercial loans
Commercial loans are what many people go for if they can’t secure internal finance – in fact, you might often find that the terms of a commercial loan are far better than other options. Business borrowing often affords you certain options to assist with your enterprise, such as overdraw facilities and even asset financing.
Furthermore, they have benefits over other loan types as well, particularly when it comes to collateral. For a standard home loan, for example, the property is used as collateral. This is also true for many business loans, but you can use equipment and other assets as well, giving you more options in improving your loan terms.
Crowdfunding
Crowdfunding is a modern dynamic, where a large number of people all contribute a small amount of finance to your product or service. These are just the average consumers, meaning that if you manage to reach your capital goals you will already have a solid number of fans who might be willing to continue supporting your company as well as spreading the word to other customers.
However, you also face the challenge of potentially not reaching your goal. Many crowdfunding services (such as Kickstarter) do not release funds unless you reach a specific goal. That can be extremely frustrating to new businesses, and you may also have to devote a significant portion of capital towards marketing in order to drum up interest in your idea.
Internal financing
Internal financing or “bootstrapping” is probably the most secure kind of financing available, but it does have drawbacks. By utilising your own money rather than lending capital, you are investing a great deal of risk into a business that could end up requiring a boost.
You certainly aren’t paying any interest on the money, but you are also not building good business credit and making it easier to achieve a loan later down the line if needed. Not to mention the large sums typically required to secure a business premises, equipment and staff – it can be tough to find that kind of money without assistance.
By utilising a commercial loan, you are securing the support of a lender that could give you what you need not only to start your business, but to keep it going too. Get in touch with us and find out how we can help you get started in the wide world of business.