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What Are the Financing Options to Open a Small Business?

At present, there are several options to obtain financing and to convert an idea into a company; evaluate each of them and choose the most appropriate to undertake your project.

  1. Seed capital

Also known as seed financing, it is a type of stock offering in which an investor acquires a part of a business or company. The term seed refers to an ‘early investment’, which means that the financing of the business is done from its creation phase until it manages to generate its own funds.

  1. Angel investors

These are, typically, wealthy investors who are interested in providing capital for a startup. In return, they receive a shareholding. Their main characteristic is that they support business initiatives in the very early stages of their development.

The main objective of many angel investors is to identify projects, evaluate their viability and provide financial support to ensure their implementation.

  1. Crowdfunding

Also called massive financing, this is the collaboration of various individuals who form a financing network to provide funding, and, sometimes, various other resources.

The general term, crowdfunding, consists of the public dissemination of information by the person seeking funding detailing the proposal, why funds are needed, etc., and it can be used for many purposes such as political campaigns, debt financing, housing, education and even the establishment of companies or small businesses

Already have a business but need financing? 

Here, expert accountants in central London provide some ideas and alternative ways to get financing or raise capital to grow your business.

Competitive advantages do not arise by entrepreneurial osmosis, it is a matter of planning and operation, and of designing strategies for the products and services that will be put on the market.

According to experts in business incubation, for every company to have a promising future it is necessary to implement innovation mechanisms, both in products, services, processes, forms of organisation or equipment used.

The experts emphasise that innovation is fundamental, but an adequate form of financing is required to implement functional strategies accompanied by the necessary resources.

Here are some alternative ways to raise capital:

Reinvestment of profits (own savings)

An important source of obtaining resources is from savings, which can be based on the reinvestment of profits obtained by products that the company already has in the market.

Shareholder investment

Innovation will represent a benefit to the company itself, so an interesting mechanism is to get the owners of the company to increase their investment in it, with the aim of promoting innovation projects.

External sources of financing such as bank and mortgage loans

In the market, there are different schemes of bank and commercial financing. The most popular are mortgage schemes; that is, pledged real estate that guarantees the payment of the loan received.

Finally, any of the outlined schemes will require a sound business plan for the project to be financed, in order to ensure that it has a market and that the money that will be invested in the project will be returned to the investor, with profits.

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