Common Reasons For Businesses Funding
Here is our list of 7 Common Reasons For Businesses to Seek Funding.
In the ideal world, small businesses would never need outside funding. Investors would line up outside the door as soon as you announced your startup. You would always have reserves of capital ready for the precise moment you needed to invest in new real estate, equipment, or vehicles. And you would never encounter a situation where you needed fast funding in order to get through a tough time or make urgent repairs.
Of course, the real world is a bit more complicated–and small businesses frequently find themselves in need of financing. In fact, the very nature of small businesses makes them especially susceptible to finding themselves in such situations. Unfortunately, banks are typically the most hesitant to lend money such companies.
How can small businesses compete, then? Fortunately, there are alternative options out there. Companies such as FundKite offer fast funding options that are relatively easy to get approved for. The philosophy that such companies operate on is simple: sometimes a strong business plan is more important than a strong credit score! Of course, in order to get approved with such companies, it is usually a good idea to take a hard look at your business plan and consider your reasons for seeking funding. Generally, the reasons that small businesses take out funding fall under one of the following categories:
1. Starting Up
Established small businesses often have quite a bit of trouble getting accepted for traditional bank loans which gives you a pretty good idea of what the situation is like for businesses that are in the first stages of starting up. This is unfortunate because many of the largest expenses that new businesses encounter occur before the doors have ever opened.
This obviously includes real estate costs, but it goes well beyond that. Inventory must be stocked, equipment must be purchased, publicity must be generated–and, as any business owner knows, a thousands unexpected expenses always seem to creep up. Startups often tend to need more funding than they expect–which makes a sticky situation even more complicated.
After getting started, most small business owners attempt to grow aggressively in the early years in order to reach the business size that they had originally dreamed of. This means more funding is typically necessary: after all, even the most successful of startups rarely accumulate enough savings to simply pay for a new location in cash!
3. Cash flow
Owning a business can be a bit of a roller coaster–and the downs can be especially harsh for new businesses. When cash flow drops, the basic costs of operation can become difficult to pay–and this can be disastrous without outside funding keeping the ship afloat.
As mentioned before, the most difficult investment to make in cash is new property. Even medium sized businesses rarely have the capital reserves needed in order to make such a substantial purchase without help. Small businesses seeking a new location, a warehouse, an expansion, new office space, or another real estate solution must inevitably rely on financing, therefore.
5. Machinery, equipment, and vehicles
The price of new machinery and equipment can often be staggeringly high. As anyone who has purchased a new car in the past decade knows, this also applies to vehicles! Because such investments are so crucial to business, however, they generally cannot be delayed–even when funding is scarce. This is why machinery, equipment, and vehicles are another leading reason why businesses seek funding.
Insufficient inventory can frustrate and turn away potential customers–which is why smart business owners simply do not tolerate it. This means stocking inventory with borrowed funds if necessary.
7. Research and development
Researching and developing new products is one of the best ways to get a leg up on the competition–but it does come with a price tag. Many business owners still aggressively seek to research–even when outside financing becomes a necessity. Ultimately, staying ahead of the competition is worth any price.
Get funding fast! Apart from easy approval, one of the most important advantages that alternative funding offers is speed. Small businesses in particular can seldom afford to wait weeks in order to be approved and funded which is the best case scenario with traditional loans! FundKite can approve your business for funding within a few hours–and have funds disbursed within three days. Apply now for a rapid funding decision!
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