There will be a time when a business owner would need help from a third party on their business funding. For this, you need to know that there are different types of business funding out there that you can choose based on your company’s need. Here are the examples:
1. Loan based on goodwill
A new business requires a good mix of equity and debt capital. The demands emerge from the budget of the cash flow and income statement, as well as the statistics relating to the sector of activity. In this situation, you must specify all the details of the investment costs for all fixed assets, and at the same time strike the right balance between equity and debt capital.
2. Working capital funding
Working capital comes from your annual business profit, over the years. If your company is suffering a shortage of permanent working capital, but still produces a useful income, then what you might need is a working capital funding. Keep in mind that you must show that this business funding will bring greater profits to your business. The effect of the loan on your company can be estimated from the budgets of cash flow.
3. Equipment Loan and other fixed assets funding
The loans for the purchase of equipment and other fixed assets are important for businesses that require a lot of equipment or fixed assets to support their businesses. This is normally secured by mortgage loans on the same equipment with the economic life of the latter, which has a large weight in the decision to resort to credit.
Equipment Loans usually last at least for 7 years, but those for the purchase of property used for commercial activities can last for 15 years or even more, depending on the situation. Since it is over several years that you invest equity capital in the company’s equipment and property, you should be drawing from the profits, just as you should do with debt capital.
4. Seasonal stock funding
Seasonal stock funding are usually short-term loans. These short-term loans are covered by the cash flows from short-term sources, clearly identified prior to the granting of the loan.
5. Loan of long-term growth
The last type of business funding has the purpose to keep the company grows over the years. You might need business funding to expand your business operational, by adding new staff, moving to a bigger offices or warehouses, etc. All these activities will help your company to grow and last for a longer time, but it also requires a lot of funding. In this case, long-term loans is the ideal option to support working capital.