How to Choose Your Financing Option
Choosing a source of finance will have you take a lot of factors into consideration. Hereunder is a look at some of the most important things that you are to taken into account as you look for the right source of funds for your needs.
One of these is the amount that you need. As a matter of fact, there are some sources of funds that aren’t as equipped to get you the vast amounts that you may be in need of. A good example is like the case of the option for going for a bank overdraft but this be a source of funds as it is, it will restrict you as to the amounts that you can withdraw anyway. In such cases, you may want to explore the other alternative sources of funds such as debentures and share capital instead. And in the event that you are looking forward to a source of finance to help facilitate some of the day-to-day operations within a business such as paying for wages, you may not be wisely advised to issue new shares for the same and instead fund them through such sources as is in the bank overdrafts and the like sources of funds.
One other factor you are to take into consideration s you look for the best source of funds is the type of expenditure it is that you seek the funds for. The long term sources of finance are generally best suited for the long term capital expenditures such as putting up a new plant or buying machinery for your operations. Then you are to opt for the short term sources of funds where you are looking for funds to help finance some of the short term and revenue matters in your business such as payment of suppliers and the like needs.
You must as well take into consideration the length of time for which the funds will be required. In case the funds are to be used on projects that will see them tied for a long period of time, it would be best for you to get them from the long term sources of funds. In the event that the funds will be utilized to fund for the short term projects, it would be advisable for you to get them from the short term sources.
One other important thing that you are to take into consideration as you look for the right source of funds for your business is your size as a business and the ability you have to borrow. In case your business is as large and stable, then you may well go for the large sources of funds.