Just about every entrepreneur requires outside funding to launch his business and keep it afloat. In some instances, it takes years for a business to turn a profit. Allying with financiers can keep a business alive until it generates a profit and eventually transitions into a self-sustaining entity. Here are some reasons why businesses reach out to lenders for help.
The typical startup company begins with a good idea backed by an entrepreneur’s savings, but few businesses can remain afloat with their founder’s cash alone. Cash infusions from venture capitalists are often necessary for the business to progress. In return, these venture capitalists are provided with repayment plus interest or a share of ownership. This so-called “seed money” is critically important for initial overhead costs like equipment, warehouse space, advertising, research and development, etc. Plenty of businesses have failed because they lacked sufficient cash to keep the doors open. This is precisely why so many entrepreneurs who have a good idea or product are willing to pay back the funds they borrow plus interest.
Most small businesses lose money in the first months/years or make only a little profit. This is a problem as a business cannot grow unless cash is available for expansion. Research, development, acquisitions, hiring and other business necessities require money. If these funds aren’t provided through profit alone, obtaining outside financing will be necessary. Otherwise, a business with plenty of growth potential will be severely limited and possibly never realize its true potential.
Few businesses can operate out of a founder’s garage or basement. Warehouse and office space are necessary for operations. Yet paying monthly rent for such space can devastate a company’s finances. In many instances it is more prudent to purchase real estate than rent it. The challenge is coming up with adequate funding for such a purchase. Financing is available in the form of a mortgage, but many entrepreneurs prefer to lean on venture capitalists for real estate loans.
An entrepreneur might have a fantastic business idea but lack the necessary cash to bring his vision to life. There is no shame in obtaining financing for equipment that will help create a potentially profitable product. Equipment can be bought or leased. Many business owners opt to purchase equipment as the cost can be written off on taxes.
Businesses often require short-term financing for particular challenges. As an example, a retail outlet might need financing to add to its inventory before back-to-school shopping starts. If the store owner doesn’t have enough cash to pay for more inventory, he or she must obtain outside financing. Otherwise, the business won’t have the supply to meet consumer demand. There are all sorts of instances when such financing is necessary to tide a business over. The beauty of borrowing money for such purposes is that it is almost certain to generate ample revenue that can be used to repay the loan and create the potential for additional revenue growth across posterity.
If you own a business or are interested in starting one, consider the many business financing options available through MY Company Funding. Contact us today and we will guide you through our financing methods. An infusion of cash just might be what your business needs to keep the doors open and eventually reach a profitable tipping point.