Financing of the first business - how to get the funds?

Financial freedom

Financing of the first business - how to get the funds?

The beginning of operations, and its development requires a commitment of financial resources. Money is needed for investments (eg. Fixed assets, equipment, software), but also on current operations - from the purchase of materials after paying for accounting services. Shortcomings in the budget are a common problem, especially in the beginning, when the company only takes the first steps. However, the financing of the first activity does not have to be difficult. How to finance operations when it is not yet sufficient income? We suggest in this article.

Financing of the first business - own funds

At the beginning of the entrepreneur always been committed own resources. Assure the value of a in such a quantity that is sufficient for the first 3 to 6 months of business, regardless of whether at that time it will bring gains or losses. Own resources include savings, but also the remuneration of time (some entrepreneurs conducting business while working for another company) or revenue from sales of assets. Own resources is a cheap and safe way of financing.

Funding and loans from public institutions

Needs often exceed the capabilities of the entrepreneur. That is the moment when you should reach for external sources of funding. One of them are grants and loans offered by organizations and public institutions.

The best-known form of subsidies for the first activities are the ones that can get a person of the status of the unemployed in the District Labour Office (PUP). Most importantly, for such a grant may apply for those who do not establish themselves in the last 12 months, so it is a source of funding for new businesses. The amount of support may be up to six times the average salary, and the funds must be used for the so-called. one-off costs (initial costs such as the purchase of machinery, tools, fixed assets), they can not be spent on recurring charges or payment of insurance premiums.

A popular source of financing are also EU subsidies. These measures can be fulfilling strictly defined by the Operational Programme conditions. It should follow the current competitions, as many of the concerns of business development and is intended to support the functioning of enterprises and enhance their competitiveness in international markets.

Money from the bank - loan company

Obtaining a bank loan for the aspiring entrepreneur is often problematic. Many people are starting to operate comes reluctantly to having to pay commissions, interest and above all constant, the monthly installment, which becomes another commitment that requires financing from a limited budget already.

Banks at the beginning niewysokich provide loans with higher amounts can talk only when they are first documented successes - and therefore profits. Therefore, credit often decide to entrepreneurs planning the development of already functioning company, not those who are in the early stages of business.

The bank loan carries a major advantage for the entrepreneur: commissions, interest and any fees associated with it are deductible and influence to reduce tax liabilities.

Factoring problems with liquidity

Still less known form of this financing is factoring. This solution is particularly suitable for companies, which due to the nature of the industry are delays in payments (ie those who have problems with liquidity).

Factoring can work in two ways. In terms of classical factoring issued every customer invoice is sent to the bank or company offering this service. This institution pays a significant portion of receivables (eg. 90%), usually within 24 hours, and you assume the cost and recovery of receivables. The fee for the service closes in a few percent per year.

Reverse factoring can be likened to a short-term working capital loan. Factoring institution may pay the obligations of the company, which then pays the delay.

Or maybe leasing?

Leasing is used primarily to investments in fixed assets. It is an alternative to credit and in the case of companies, is often more advantageous for them. As part of the lease agreement the entrepreneur receives the right to use the equipment, car or other asset by paying with this account leasing installments. After the end of the contract, the subject of lease can buy at favorable terms (typically a few percent of the price) or pay.

There is also a form of reverse leasing, under which own fixed assets of the company shall give the lease to give for the funds. Undertakes to pay the same lease as the classic form of the lease.

Help an angel ... business!

It happens that the entrepreneur has a great business idea, but do not have the resources for expensive initial investment, so that it could become operational. This applies above all high-risk start-ups, which can be very innovative, so require significant investment. In such cases, the best solution may be to help business angel (business angel). Business angels are individuals who have been successful and have budgets that allow them to support interesting projects, even if they are subject to risks. Besides financial resources, they share the knowledge and support of the business.

Business angels at the beginning are anonymous. You can contact them through the so-called. network of business angels. In the initial stage, you have to present your idea of ??a group of investors providing all the necessary data and information on the application. Only when one of the angels decide to support, reveals his identity.

Venture capital

Institutional counterpart business angels are venture capital funds. The difference is that they do not invest private funds, and those that have been entrusted to them. In this connection, that operate with other people's money (private investors or institutions) always work with a focus on profit. Business angels sometimes support businesses for another purpose (eg. For the sake of the social dimension of the project), but venture capital always invest your money to get a specific term (eg. 5 years) a certain rate of return.

For this type of funds, the most important is to increase the value of the company in the shortest possible time. Often, the venture capital support projects under a very high risk, expecting in return for their success, high rates of return.

Crowdfunding, or crowdfunding

The last possibility of financing the activities of the first, which I want to mention is a very popular crowdfunding. It consists in supporting interesting projects by a number of independent people who often pay even a very small amount.

Crowdfunding is performed by a specially created web portals. Originator describes and shows (graphics, photos, videos) plan their project and specifies the minimum amount which is necessary to accumulate its launch. Often, investors receive awards for their support (eg. The first copies of the product).

As part of the crowdfunding usually they support innovative business ideas, but also social projects or private - the only criterion is there such an interest users, inducing them to make payment.