Financing Sources and Types to Ensure Successful

Money is of extreme importance nowadays. Almost

everything that we do involves money. The same is true

if one wants to venture into business or buy a home

which is one of the basic needs for survival. Financing

or supplying of funds in business is a must to make it

grow and achieve the desired expected profit (together

with the right planning and managing). Common mistakes

encountered by new entrepreneurs are wrong financing

sources, underestimated amount needed for capital and

inflexible financing types. These problems however can

be prevented by careful planning and analysis of the

various factors involved in starting a business.

In general, business people can choose from the two

types of financing, the debt and equity financing.

Equity financing is the type commonly used by small or

growth stage entrepreneurs. The sources for this type

involves the center of influence that trusts the

entrepreneur, such as friends, relatives, family

members and other people interested in investing their

money in the business. However there are also

capitalists who are ready to take the risk of financing

small businesses. These capitalists may include

financial institutions, authorized government agencies

or well-to-do individuals in society. There are also

venture capitalists that finance new business in the

industry to get equity. Businesses that have been in

the industry from three to five years are preferred by

venture capitalists. They have various methods to

manage or deal with the businesses that use their

financing or invested money. They can influence the

decision making policies of the business in the event

its performance does not come up with the expected

result.

Another general type of financing is debt financing.

This type has varied sources which include Small

Business Administration Loans, greeneasylife.com/CommercialLoan commercial loans through

banks and personal loans from family, relatives and

friends. The government recognizes the importance of

business in the economy of the country and that is why

they offer programs that can encourage the growth of

small enterprise by having their own financing agencies

tp help a lot of young business people and

entrepreneurs. Debt financing through banks is the

traditional means to fund a business. The banks act as

a short term lender for the business person to have the

needed money to buy equipment and machineries necessary

for the business to flourish. The SBA or Small Business

Administration Loans are used in the case of local

banks. The loan that can be acquired can be from $5,000

to $2,000,000.

From these two general types of financing branch the

various kinds of financing involved - not just in

business but in other fields as well. A few of which

are piggyback financing, owner financing and creative

financing. Piggyback financing is used by home buyers

who want to avoid mortgage insurance which is required

when the mortgage is more than 80 percent of the

purchase price. Through piggyback financing, the

borrower can have two mortgages with costs that may

vary. Owner financing happens when the owner or seller

of the property is the one financing the buyer so in

this case the owner acts as the bank. The buyer in turn

can pay the needed amount monthly or whatever may be

the agreement instead of going to the bank for

financing. Creative financing happens when the house

buyer has a third party lending institution which can

be a bank or a loan agency.

David Arnold Livingston is a business owner and entrepreneur with many years of finance experience. Visit: financingfor.com financingfor.com for lots of great financing options and ideas.