Starting up a business means you have to have a good business finance background. It isn't too difficult to learn about business finance, especially with online learning being so convenient these days.
You also need a large amount of capital to purchase equipment, pay for the application of permits and licenses, hire your own crew and train them, and to buy inventory. There are several sources of start up capital aside from your own savings. You can opt for business credit from banks, cash advance companies or work out payment terms with your suppliers.
You can borrow money from a bank through a loan. To qualify, you need to show proof that you are capable of paying back the loan. You need to give the bank a business plan to show that you will eventually earn enough profit to keep your business afloat, and have enough cash flow to pay your loan. To back up your business plan, you may also provide the bank a copy of approved contracts or purchase orders with clients, which show that your business is moving forward.
You also need to have a good credit history, so if you have unpaid loans, it will be a disadvantage on your part, since the bank may not approve new loans if you have a bad credit history with other lending institutions. You also need to have a good personal credit history, otherwise, you may need to apply for credit repair before you secure a loan.
An unsecured loan, which is based only on the borrower's credit rating, is usually not available for large loans. So aside from a good credit history, having some assets that can be liquidated can also gain the approval of banks. The assets will be collected by the banks in case you do not pay the loans on time.
The loan amount and interest will depend on your FICO score, a statistically calculated score used by banks to assess your credit rating.
Cash advance companies
There are companies, which are not necessarily banks, that provide financial services including loans. There are companies that you can deal with that will provide you with a cash advance if your business accepts credit card transactions. The amount that will be advanced to you will be based on future credit card transactions (receipts) through your business. You get to pay back the lending company when you generate credit card sales. This way, you are not pressured to raise a large amount of money for payment when business is quite slow, since you pay an amount proportionate to your sales.
You can also opt for a credit card application and use it to finance your business.
Cash advance companies can also purchase your receivables. This is very useful if you need the cash now and your receivables are still due in a month. The cash advance company will be the one to collect the amount on the schedule you initially agreed on. On the other hand, you can also have a cash advance company fund your purchase orders. In this set up, cash advance payment is guaranteed by your finalized purchase orders with clients.
Agreement with suppliers
You can also have an agreement with your suppliers regarding the schedule of payments for your orders. You can time it in such a way that you have already collected payments from your clients, and you can use the collected amount to pay your suppliers.
Other valuable financing tips are available through online courses in business finance.