What Are The Sources Of Finance For A Business?

There is a very famous proverb, which states that it is never recommendable to put all the eggs in a single basket when you are dealing with the business strategy. It has been noticed that the statement is entirely true when the point of financing a business. One thing that you must be aware that the banks are not the only source of getting finance, there are some other ways too. Listed below are some of the sources of finance for a business. They are-

1. Personal Investment

The first and the foremost thing that you must keep in your mind that staring a new business means that you must have a bit of cash or asset of your own. This gives an indication to the investors that you are planning for the long-term commitment of your own project.

2. Love money

This is the money, which is generally loaned by the parents, family, friends, and spouse. In terms of bankers and investors, this amount is referred to as patient capital. In this case, the money needs to be paid later when the business profit increases.

3. Venture capital

This source of finance is only applicable for the businesses, which are technology driven and also the one which has higher growth potential. Generally, these sources of finance are given to the business in the field of information technology, biotechnology, and communications. When you opt for the venture capital than in that scenario, they expect a healthy return on their investment.

4. Angel Investment

You will be amazed to know that they are the retired company executives or the wealthy individuals who make sure that their money is invested directly in the business that is owned by others. The only limitation of the angel source of finance is that they provide money only during the early stage of any business.

5. Business incubators

In the case of the business incubators source of finance, they focus mainly on the high-tech sector. They stretch their hand to provide support for the business in their several stages of development. Usually, the incubation period does not last for more than a couple of years. It has been noticed that business, which gets this type of support often, operates within the state of the art sector.

6. Government grants and subsidies

One of the important sources of finance for your business can be government grants and subsidies. But getting grants from the government can be really tough as there are strong competition and criteria that you need to follow. It has also been observed that you need to match the funds for which you are given. Moreover, the amount also varies based on the granter.

7. Bank loan

You must be aware of the fact that bank loans are one of the most common sources of funding for different businesses. But one point that you must not forget that all the banks have their own merits as well as a demerit. Hence, it always better to go around and look for the one, which best matches, your demand.