Do you know what the biggest challenge faced by entrepreneurs is? Any guesses? Is it formulating a great marketing scheme or is it the branding strategy? Is it managing employees or establishing a supply-chain network? Well, all of the aspects mentioned here are critical indeed. However, the most intricate aspect is backing up your small business financially.
Finding it strange? You would think that Finance is the first thing you will plan about while launching the business. Yes, everyone does it. However, situations arise when you need to pour additional money once the business gets momentum. Since you haven’t started earning from the business so far, it is an extra burden.
Apart from the money invested by the founders, there is always a need for additional financing. Every entrepreneur faces the challenge of maintaining a consistent cash flow post launch. Here are a few ways it can be done:
- Credit: Seek the possibility of borrowing from banks or financial institutions. Whether you need it for adding some more working capital or espanding the business, always read the terms and conditions before you proceed. The additional amount you will be borrowing should be returned as fast as possible. It puts an additional burden on the bottom line, and the Break Even Point gets delayed.
- Equity: You may check the possibility of getting private equity from family and friends, venture capital companies or other financial institutions. Equity is a good choice because the liability gets distributed, but it is equally risky also since so many entities are involved in it. You need a thorough analysis of the situation.
- Adjust the funds within the company: It is the least expensive thing indeed. Experts recommend it because it doesn’t put additional liability. It is very much possible by carefully managing the cash inflow and outflow. You should use every single penny that is surplus after meeting the ends. Managing the balance between equity and debt is the key to financial growth. Entrepreneurs, who do it well, get success in the business.
Regardless of the mode you use for backing up the small business financially, it is always important to check the feasibility from all aspects. Make sure you do not invite a legal complexity by choosing an incorrect method. Keep the legal and financial advisors in the loop. Rather, let them drive it in your accordance. Happy financing!