10 Ways to Finance your Business

In today’s article we are going to develop 10 ways  to finance your company , since there are many and very diverse sources of financing that exist in the market.

Hasn’t it ever happened to you that you have had a financing problem and when you want to know what is the best way to finance yourself, you have come across hundreds of possibilities? And each one is interesting for some types of companies, but it is possible that not for yours, so in the end you are left thinking, what about my company? That is why we want to introduce you to all the ways to finance your company  so that you can decide which one best suits the needs of your business project.

In the first place, we are going to mention the types of financing of a company  that exist, to then break down each of the sources of financing offered by private entities.

Types of financing

There are basically two types of financing of a company according to the origin of origin of said financing. The two types of financing that a company can have are, on the one hand, internal financing, coming from the company’s own resources, and, on the other hand, external financing, whose resources are external to the company .

Each one has its advantages and disadvantages that you can read in the article “financing own resources vs external financing”.

Internal Financing

The own financing is constituted by those financial resources that the companies generate by themselves . There are two types of self-financing, on the one hand we have enrichment self-financing, a consequence of the company’s own economic activity, this type of resources are also called “reserves”, on the other hand, there is maintenance self-financing, a result of the productive amortizations and provisions.

Sometimes this type of financing is usually a basic and sufficient source of financing for companies.

External Financing

When own funds are not sufficient to finance business activities or projects, companies often resort to  seeking external sources of resources . These sources of financing can have different origins, they can come from capital issues, contributed by the partners of the company; or external financing instruments, provided by banks or private financing entities.

This source of financing is sometimes advisable due  to the speed and agility  with which it acts in the procedures required to obtain loans, as well as the lower demands and requirements with respect to traditional bank financing in accordance with the security and guarantee of the loans. credits.

Ways to finance your business

Among the very diverse and disparate types of financing of a company, here we expose the ten sources that we have found most interesting.

Leasing

It consists of a long-term lease contract with an option to buy , in which the company agrees to pay the established entry fee and a periodic amount before becoming the owner of the product, assuming all the derived expenses that it entails ( taxes, breakdowns …).

Renting

It is a contract to acquire  the machinery or vehicle by paying a monthly amount. During said contract, the company that rents the product is responsible for the maintenance costs. Once the contract ends, there are usually different options: From returning the property and ending the contract, to starting a new one or even extending the period.

Debt funds

It consists of the  issuance of debt by the company  in order for investors to buy it and thus become its creditors. Later, the company must return the money from that loan together with an interest amount imposed by the investor, who is in charge of analyzing the market situation in terms of interest rates.

Factoring 

It is a financial instrument whose purpose is to  advance the collection of invoices issued by a company to a client . This charge is assumed by the financial institution, which will be responsible for both the monetary advance, as well as the collection by the client in a set time.

Confirming

It is a financial procedure by which  a financial entity assumes the management of payments by a company to its suppliers  in the event that it cannot meet said payments within the deadlines established by the issuance of the invoice. In this way, payment of the invoices issued is guaranteed, guaranteeing trust in the relationship between the company and its suppliers.

Crowdlending

This tool allows companies or individuals to obtain financing for their project  through the collaboration of a group of people who invest a monetary amount . In return, investors receive a consideration according to the interest rate paid by the company. The Crowdlending platform will in turn receive a small commission for participating as an intermediary.

Crowdfunding

This tool allows  project financing based on the collaborative economy . Collaborators do not receive monetary compensation for their contribution, but rather rewards or privileges once the project is developed.

Stock financing

This means is used by companies that have  products in the form of inventory in order to mobilize and obtain liquidity from the commitment of these products. The company obtains a loan for the value of the inventory that it wishes to mobilize and once these products are sold, it must pay the corresponding part of the loan.

Export financing

This financial tool allows the company to  acquire in advance the liquidity generated by the unpaid invoices  of its exported products or to cover the previous expenses of production of said products. The financial entity is in charge of the collection of these invoices by the debtor company.

Public entities, aid or subsidies

This type of aid is granted by public institutions. They are presented in the form of grants and are processed directly from the public body that offers such aid. They are mainly intended for those small and medium-sized companies that wish to create value, grow and create jobs.

We hope that with this article you will be more clear about the different types of financing for your company, because we do not want anything to prevent the realization of your ideas and projects!

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