How to Finance Your Business

The lifeblood of every business lies in its sources of funding or finance. Financial institutions such as banks, credit card companies, consumer finance companies and stock brokerages provide different services which can help your business raise capital.

Commercial banks are generally referred to as banks which provide a full menu of services such as:

* safekeeping of your money in an account

* issuance of checkbooks which allow you to make payments without bringing cash

* personal home loans, commercial loans and mortgage loans

* issuance of credit and debt cards

* allow financial transactions using Automated Teller Machines (ATM)

* allow electronic fund transfers

People deposit money in a bank for safekeeping and later use. The bank then lends the money out to other individuals or corporations for consumption or investment. It charges interest on the loans and earns profit that way.

Companies often turn to banks for short-term funding and capital requirements and use ownership equity (company shares) and bonds for long-term funding.

These funds are provided in exchange for equity or ownership in the company and are often used to acquire businesses in which they invest.

In the early years of ecommerce, venture capital was a popular source of funding coming from professional outside investors who wanted to break into the new and high potential growth dot coms. The goal of a venture capitalist is to take the company to an IPO or Initial Public Offering or trade sale of the business.

A startup company can also obtain funding from an affluent individual known as an angel investor who will provide much needed capital in exchange for convertible debt or ownership equity. Angel investors may also pool their funds together in what is referred to as an angel network.

Conglomerate

This is a financial services firm with a diversified business covering more than one sector of the finance market such as life insurance, health insurance, asset management, and retail banking.

Other financial services ordinarily used by businesses are intermediation and advisory services of stock brokerages. Stock brokers assist investors in buying and selling shares. While a full-services broker provides investment advice to a client and charge higher commissions for such personal service, more discount brokers nowadays add a similar benefit for much lower commissions.

Whether as owner’s equity or as a loan, finance services provide much needed funding to grow a business.