Finance Options for Small Businesses
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Small businesses have several options for accessing funds to start or expand their business. Financial institutions offer formalised loans, which give the business access to cash and take the form of a term, bridging or personal loan. These institutions include trading banks, finance companies, credit unions and building societies and insurance companies. To obtain these loans, the business is required to meet certain conditions and guidelines. These conditions and guidelines tend to the most stringent with the trading banks and young businesses may find it difficult to obtain finance with these institutions because of this.
Loans can be for the short, medium or long-term, this indicated the length of time that the business has to repay the funds. These loans are then subject to fees and charges. These will include set-up fees, government stamp duties and the interest payable on the funds. Interest is the money paid to the financial institution for the privilege of borrowing money. Depending on the terms of the loan, interest can be fixed or variable. These financial institutions also offer funds via overdraft facilities, consumer mortgages and commercial bills.
These financial institutions offer many varied types of assistance depending on the requirements of the business. Businesses can also access funds through finance lease or sale and leaseback arrangements, as well as hire purchase loans. This option is generally for the purchase or use of property or machinery and/or equipment used in the business.
Local and federal governments also offer grants. These grants include grants for New Enterprise Incentive Scheme. Businesses must apply for these grants must meet certain criteria to be eligible.
Funds can also be received through private finance, i.e. family and friends. The advantages are the timeliness and flexibility of the loan. Funds can be made...