Eight Ways to Raise Funds for Your Business – If you are afraid to into business because you don’t want to gamble your life savings away, here’s great information. There are many financial alternatives you can avail of. In fact, banks are mandated by law to allocate at least 8 percent of their net lending portfolio to small businesses.
Here are a few ways to obtain capital for your business:
1. Take Out a Personal Loan – Personal loan is far easier to secure as it is usually based on the borrower’s integrity and ability to pay, and is not dependent on collateral. If you are currently employed, you can also take out what is called a salary loan.
Personal loans are available through government institutions such as the Government Service Insurance System (GSIS), Social Security System (SSS), Small Business Corp or the Department of Trade and Industry. There are also many micro-financiers willing to provide start-up capital to people without the need for collateral; all they require is a sound business plan and credibility. Its interest rates are lower than commercial bank loans – 8 to 9 percent for terms of less than one year.
2. Obtain a Bank Loan – The banking world is always on the lookout for good investments. Investors are keen to grow their money, and if your business plan is sound, a bank might agree to be your partner in the business. Two SME-friendly banks are Planters Development Bank and Bank of the Philippine Islands. Interest rates on a personal bank loan are around 1.10 percent per month – 23.5 percent per annum. Though, business-specific SME loans are offered at lower rates. The loan requires collateral like house, car, land, etc.
3. Enter into a Joint Venture – You can start a business with partners by pooling your resources. The extra strength of teamwork can succeed where one alone might fail.
4. Use Credit Cards – Credit card is an easily accessible resource for starting your business whether to buy equipment, pay suppliers, or charge operational expenses. Credit card is as good as cash. Though, you need to avoid mounting credit card debt.
5. Avail Check Rediscounting – You provide a post-dated check to the lender – say P10,000 dated a month ahead – and in return they give you that same amount in cash but minus interest, i.e. P9,500 at 5 percent interest. At the end of the month (or whatever the terms are), they cash your check.
6. Try Consigning – Consigning is selling goods on behalf of a supplier, with payment due upon sale. Either you tack on your own commission when you sell the product, or your supplier pays you an agreed-upon percentage afterwards.
7. Liquidate Portfolio Investments – Portfolio investments include stocks, bonds, and mutual funds. Because they’re your own assets, you are more careful with how you will spend them.
8. Tap Venture Capitalist – Venture capital is not a loan that needs to be repaid; rather, venture capitalists (VCs) invest their money in exchange for an ownership share in your company.
In raising capital for your business, never borrow more than you can pay, and always pay promptly. When you have a good credit history with your lenders or investors, they will happily continue to do business with you in the future.
Source: Masigasig Magazine