FUNDamentals For Finance Injections
The processes involved in raising funds for any type of company is all about knowing where you can go to acquire it. There are many options, but the startups of this world may be a little too wet behind the ears to know where to go. That’s not to say that every young business lacks the knowledge or the foresight, it’s just something that gathers momentum with the right research and knowledge as the business expands. When there are companies that are relying on technology or equipment to do the vast majority of the processes, you need a stable financial plan in place. What can you do to give your business the cash injection it needs in those difficult early days?
This is essentially a do-it-yourself method to financing; it is without any form of external investment and is achieved by the entrepreneur’s resources. It doesn’t actually have to be cash. If your company relies on equipment or technology, you can use a key asset, like your computer. While there are many advantages of bootstrapping, namely your spending habits will tend to be on the frugal side, and you control the company outright instead of passing off a piece to an external investor, who will look upon you more favorably if you need their assistance later, but there are disadvantages. The main downside is the risk involved with putting your own funds into the operation, which you will need plenty of, and the growth of a company down this route means that it can take a lot longer to get it to a good working stage.
This is where a piece of equipment is used as collateral. The lender will fund the business how much the equipment is worth. This is all dependent on the type of equipment you have at your disposal. And if you are reliant on equipment to build the company and there could be certain specialized items you may need, like fuel such as Red Diesel, which need to be transported via Red Diesel drums or safe equipment, then it is a good approach to use equipment as collateral. The downside to it is, again, the risk involved. If you are unable to make money back and the equipment is taken away, this means you are unable to operate as effectively, if at all. It is a method to use if you are already running to a certain degree of success.
Incubators Or Accelerators
Incubators are a private equity fund that provides shared office space for up to 20 businesses at any one time. As part of this package, you can receive mentorship from experienced entrepreneurs or execs until you are ready to start walking on your own two feet. This is great when you are a young business because you have a support network around you to give you some confidence as well as the encouragement to develop learning skills and learn from your contemporaries. Accelerators are the same as an incubator, but you only get space for a short period of time, around 6 months or less.
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