Funding for small businesses

Funding for a small business

Personal savings- this is where the person starting the business uses the money that they have earnt from previous work. This is good because then the business is theirs and they don’t owe anyone any money. However, if the business fails then they lose their savings and their source of income.

Family and friends- Family or friends sometimes offer to help start a business, this is good because there are no deadlines to pay the person back, and there wouldn’t be any debt on their loan. However, this can cause friction and the family or friends may lose a lot of money because they wouldn’t have understood and assessed the businesses plans.

Crowdfunding- This involves asking for small donations from many people, this is good because the money would not have to be paid back. However, it requires a lot of work beforehand and it cannot be predicted how much money the person would make.

Angel investors- These are people who donate money to the business in exchange for a share of the business and its profits. This means that the person running the business wouldn’t be under any direct pressure to pay the money back. However, they would lose some control of the business.

Bank loans- this is one of the most popular ways to start a business, the person starting the business wouldn’t not have to lose any control of the business and the process is relatively quick. However, the interest can be very high, and the person would have to pay back a lot more than they originally borrowed.