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Factors to Consider When Choosing a Method of Financing a Business
By Derek Dowell, eHow Contributor
Banks may want to lend you money if you present a well-prepared business plan.
Whether you're starting a new business from scratch or operating a successful business already, securing financing first requires you to think about the best method to go about it. There are many factors to take into account, though some may vary according to an entrepreneur's personal situation. Poor management is the most frequent cause of small-business failure, according to the Small Business Notes website, but it is closely followed by insufficient financing.
Other People Are Reading * The Disadvantages of External Equity * Financing Methods for Capital Purchases 1. Funding Availability * The first thing to do when choosing a method of financing your business is to determine what your range of options are. Small Business Notes lists the most common sources of finding money to start a business: personal savings (72 percent), banks (45 percent), friends/relatives (28 percent), individual investors (10 percent), government-guaranteed loans (7 percent) and venture capital firms (1 percent). Most people will not be able to rely on a single source, since banks expect the business owner to put some of his own money at risk in the venture. Spend some time thinking about what sources you can access.
Personal Savings * Choosing to risk personal savings on a business venture requires serious thought, especially if the money is part of your retirement plan or you have others to consider, like a spouse or children. Don't pretend there isn't a chance you could lose it all. A young, single entrepreneur might be willing to risk more personal savings than a middle-aged family man. When drawing on personal savings for investment in a business, decide how much you can…...

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