Whether you are opening a large corporation focusing on “green” energy, a medical practice focused on vaccinations, or a law firm representing drunk driving offenders, you will need some sources of capital to begin. Unless you’re already financially wealthy, you will not need to continue on to the rest of this article. But, if you are like the rest of us, you will need some financial backing and help. Good thing you are reading this article because below are some sources of capital that can help get your business off the ground.
What are the sources of capital?
Share Capital. When a company is first registered, it must have a certain amount of share capital. This is the money that has been put into the company by the shareholders and can be used to finance the company’s activities. The amount of share capital required depends on the type of company and the jurisdiction in which it is incorporated.
Mortgage loan. (Self-explanatory)
Retained Profit. This is the profit that a company has made over the years which has not been distributed to shareholders in the form of dividends. Retained profit can be used to finance expansion or other investments without raising external capital.
Venture Capital. This is money invested in a company in exchange for an equity stake in the business. Venture capitalists are usually only interested in companies with high growth potential and are often willing to take on more risk than traditional investors.
A debenture is a loan secured against the assets of a company. Debentures are usually issued by larger companies and carry a lower risk than unsecured loans, as their assets back them.
Project finance. This type of financing is used to finance the construction of a specific project, such as a new factory or power plant. Project finance is usually provided by a consortium of banks and other financial institutions.
Asset-based lending. This type of loan is secured against the assets of a company, such as inventory or equipment. Asset-based loans are often used by businesses that have difficulty obtaining traditional bank financing.
Factoring. This type of financing allows a company to sell its accounts receivable (invoices) to a third party at a discount to raise cash. Factoring is often used by companies that have difficulty collecting payments from their customers.
Invoice financing. This type of financing allows a company to sell its accounts receivable (invoices) to a third party at a discount to raise cash. Invoice financing is often used by companies that have difficulty collecting payments from their customers.
A line of credit is a type of loan that allows a borrower to access funds up to a specific limit. Businesses often use credit lines to finance short-term working capital needs.
A microloan is a small loan designed for entrepreneurs who have difficulty accessing traditional forms of financing. Community development organizations or microfinance institutions usually make microloans.
A loan guaranteed by the Small Business Administration (SBA) is a type of loan designed to help small businesses obtain financing. SBA-guaranteed loans are made by traditional lenders, such as banks, and are backed by the full faith and credit of the US government.
Crowdfunding is a type of financing that allows businesses to raise money from many people. Crowdfunding can be done through online platforms, such as Kickstarter or Indiegogo, or more traditional methods, such as public events.
Bootstrapping is a type of financing that refers to personal funds or other forms of funding that do not require external investment. Bootstrapping is often used by startups or other businesses with limited access to capital.
A term loan is a type of loan typically used to finance the purchase of equipment or real estate. Term loans are usually repaid in equal monthly payments over a fixed period, such as five years.
Equipment financing is a type of financing that is used to purchase equipment. Equipment financing is often done through a leasing arrangement, in which the equipment is leased to the business and then purchased at the end of the lease term.
Small business loans are loans that are made specifically for businesses. Small business loans can be used for various purposes, such as working capital, equipment purchases, or real estate acquisitions.
Invoice financing allows a company to sell its accounts receivable (invoices) to a third party at a discount to raise cash. Invoice financing is often used by companies that have difficulty collecting payments from their customers.
A merchant cash advance is a type of financing that allows businesses to borrow against future sales. Merchant cash advances are often used by companies that have difficulty obtaining traditional bank financing.
A pledge loan is a type of loan secured by the pledging of assets, such as stock or property. Pledge loans are often used by businesses that have difficulty obtaining traditional bank financing.
Import financing is a type of financing used to purchase goods imported into the country. Import financing is often done through a letter of credit, in which the importer provides collateral to the lender in case the shipment is not received.
Government loans are loans that government agencies make. Government loans can be used for various purposes, such as small business financing, housing financing, or student loans.
Personal loans are loans that individuals make to other individuals. Personal loans can be used for various purposes, such as debt consolidation, home improvement, or medical expenses.
Why do startups need lawyers?
A startup lawyer helps your business foresee legal issues and advises on how to avert them successfully. It is the role of a lawyer to ensure that your business is protected from the beginning. They analyze your business, offer preventive solutions, and manage the business risks, including what type of capital you need to begin.
Sources of Capital
There are many different capital sources available to those looking to start a business. The key is to find the right source of capital for your particular business and make sure that you use it wisely. Then, with a little bit of planning and hard work, you can get your business off the ground and on its way to success.