Ways of Financing Business.
Due to the fluctuating of market forces in the business world today it is quite important if any business makes proper arrangements in order to have positive cash flows. Some factors will have to be considered by any business willing to have positive cash flows in order for it to remain relevant in the markets at all times.
In order to determine how well can a business be able to finance its own investment one ought to understand the current financial position of the business that is, making a determination of the funds available less the owners’ equity. Fixed costs determination of any business helps in making vital decisions about investment of any business, that being the case one has to be very keen on understanding the total fixed cost may be for every month so as to know the how to get the returns of financing the business. Despite considering the above options, one has to know that business cash flow will be determined by the uniqueness of the business, that is, maybe business size, owner resources, or even business module.
Once one gets this information correctly will have to find some sources from which he will be able to finance the said business. There are about three major categories of financing one can look for namely short-term financing, medium-term finance, and long-term finance. Short-term financing is mostly for those businesses that may have constraints currently that may require some financing, repayment for this kind of financing is usually one year, mostly used for some un budgeted expenses that must be incurred and the business is not in a position to foot the bill as per now. Drawing cash than the one in the business bank account also known as bank overdraft is one of the options one has to seek when looking for short-term business finance.
Medium term financing on the other hand are aimed to finance a business that may be willing to do some re-engineering, or acquiring a new plant or machinery, mostly this kind of funding will require about one to five years to finance . Financial institutions and commercial banks are among the best examples of medium-term business financing. It is good to note that some of this financial institutions are even offering business finance without necessarily considering the creditworthiness of the business. However in order for this to work out, one needs to visit the said financial institutions and understand the policies laid down for one to be financed yet with poor creditworthiness.