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How to Raise Funds for a Small Business

By Brown Ezilon.com Articles Published 11/20/2010 | Advertising

Every business, be it large or small needs a capital to support its daily needs; therefore a good financial backup is essential if it wants to succeed. Funds are needed to promote services and products right from the start, equipment is needed and employees have to be paid, therefore you need money to support your venture or you will be running into problems.

If your business is only a small one you can find some good funding possibilities with short term, medium and long term loans. You can of course raise funds from accounts receivable financing and business line of credit. You can raise short term fund to support your working capital needs by using personal and payday loans, which are good options for smaller businesses.

Payday loans are probably amongst the best options for raising funds if you need money to meet all your small business needs right from the start. To be able to take advantage of these kinds of loans you need to sign a post-dated cheque with the amount you need to borrow. This loan amount is then credited to your bank account and is practically immediate, which is the advantage with these types of loans. Payday loans are sanctioned without delays and the company that loans the money does not need you to specify the reason you need the loan.

Unfortunately, because the money is paid immediately and is available for use without the usual delays, the interest rates are high. In addition, if you do not pay the amount borrow on time you will also have a penalty to pay in the form of high interest rates.

Term loans are another possibility and come under different terms depending on the time span of the loan.

If you need a loan for more than a year, you will be applying for a medium term loan and loans for more than a five year period are known as long term loans. The short term loans are those you will be paying off within the year.

Long term loans are ideal if you intend to find funds to expand your business or you need to start it off from scratch. In this case you will need to buy new equipment and will need extra funds to advertise your new enterprise. You can choose your loan according to your needs taking a secured or unsecured loan.

You may also like to consider leasing as another way to find funds for your business, as you can deduct taxes on these kind of loans and can spread the refunding over several years, making it a very interesting option to consider for your fund raising.

Another form of fund raising is invoice financing also known as account receivable financing. This is an alternative method if you need immediate cash and your invoices will pay after thirty to sixty days. You contact the factoring company and sell them your account receivables for a fixed fee, thus receiving direct financing.

Other financing possibilities are government grants and credit unions; it is up to you to decide which funding methods best suits your needs.