Getting The Best Financier
We all at one time or another in our lives find ourselves in need of loans or financial assistance. You may choose to get a loan or assistance from family, friends, investors or even banks.It is a tedious and extremely time consuming task to select the right institution to offer financial help to your business.It is important to weigh the costs and benefits before settling on any institution to offer you funding. Below are things you ought to consider before choosing a source that best meets your financial needs.
It is very important that you weigh the risk involved from getting financial assistance from your preferred source.Unforeseen occurrences may affect our ability to pay our debts. We should consider the risks we put on our relationships with family and friends if we are unable to pay a loan they offer.Banks may hesitate offering funding for your company if you are a start-up, owing to the lack of credit history. However, some financiers are willing to lend start-up businesses money but they ask for higher returns as compensation for the risk they are taking. Weigh the risks involved in acquiring funding from these institutions before making a decision.You ought to ensure that your debts do not outweigh your equity or else your business will be in trouble.
Control should also be put into consideration when choosing the source of your finance. In most cases, banks and other money lending institutions cease to have control of your business once you are done repaying your loan. This is not the case for investors since they maintain the right to follow up on your business until you are able to buy them out. If you would like to continue being in absolute control of your business once you are done repaying your source of finance, it is better to acquire loans.
The cost of finance should also be considered. Every business’ goal is to minimise the cost of finance and maximize returns acquired. If you choose banks and other money lending institutions as your source of finance, you will incur additional costs such as interest rates, broker’s fees and origination fees.Investors will require dividends for the shares they purchase. Before choosing your source of finance, you should weigh both their pros and cons and choose one with the least cost.
We should also consider whether we require short term or long term funding when sourcing for finance. Long term loans are paid for years while short term loans are provided for a very short period of time. It is important to choose funding that is most favourable to you and your business.
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