Small Business Finance
Every business needs capital. Capital often comes form the
owners’ pocket. If the owner does not have sufficient capital, then other
business finance must be considered.
Business finance can be split into two areas. Risk capital
and working capital.
Risk Capital Small Business Finance
Risk capital is generally expended on unproven activities
such as product development and unproven marketing activities. Risk capital can
also be required for capital investments such as plant and equipment.
To raise risk capital, you may consider small business
finance loans, venture capital, capital from business angels or government
grants. In the case of capital investments in new plant and equipment, you may
also consider leasing as a small business finance option.
Working Capital Small Business Finance
Working capital is used to pay for the ongoing costs of the
business, such as stock purchases, wages, regular advertising, and more.
Working capital can be financed using the small business
finance options explained above under the risk capital heading. In addition,
you may have other options, such as factoring. This term refers to selling your
invoices to a factoring company for immediate payment. The small business
finance company, or factoring company, will pay you a percentage of the invoice
amount, immediately after you have sent out the invoice. They will then collect
the money from the customer and pay you the difference, minus a fee.
