Personal Finance

Popular Funding Sources for Small Businesses

In 2022 around 1.4% of small businesses in the US are closing down every week. This could be due to improper financing or the usage of unsafe sources of capital. Many people believe that once they have an incredible idea for a company, they’re set for life.

But no great idea can become a money-making venture without the requisite finance. Working capital is essential to any business, and there are various funding sources that have become the go-to for entrepreneurs.

Multiple Financing Streams

When it comes to financing, some of the top experts in enterprise and business in the United States caution against putting all of your eggs into one basket. In other words, it’s not smart to completely finance your business from one source. Instead, you need to spread your capital engagement out between multiple different sources to have a backup reserve of funds should one of the sources become unreliable or inefficient. Multiple investors, a loan, and a high-interest account can all work together to ensure that your cash flow remains constant.

Not only will diversifying your financing sources provide your company with more security, but you will also be better equipped to deal with season downturns in business.

Personal Finance

When starting a business, the first investor should be yourself. If you don’t believe in the idea that your company is based on, why would anyone else? An entrepreneur needs to personally invest at the start to get the company up and running and bring potential investors in. Most high-level financing investors will be skeptical about investing in a business without any customer base, already existing capital and products, and a strong trajectory of growth.

As the founder of a company, it’s your responsibility to get the business off the ground and continue partnering up with new investors once you’ve established a reputation. A proven record of financial growth is always an important factor for entrepreneurs and investors, and a high interest savings account is an excellent option to increase ROI on money saved. High interest savings accounts yield around 25 times the national average of a normal savings account, making them ideal for entrepreneurs who want to build up capital.

Government Grants and Subsidies

There are various departments of the United States government that seek to spur economic growth by providing grants to businesses that they see thriving, growing, and eventually contributing heavily to the economy. As such, the government is relatively picky about which businesses they decide to back and the criteria for receiving one of these grants are often difficult to meet. Recently, however, the government has been working on a free grant system to help small businesses thrive in what has been one of the most tumultuous eras for the United States economy.

Bank Loans

Many small business owners require some sort of funding to finance their venture upfront. Banks are the obvious place to start, as they offer a variety of different types of loans that are suited to entrepreneurs in different sectors and industries. The two most common loans are small business loans and personal loans. Both types of loans offer a source of funds that allows entrepreneurs to move forward, however, they each come with their own criteria.

The funding option you choose for your business will depend on many factors. But in 2022 there are plenty of options that support entrepreneurs who need to kick-start their ventures.

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan

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