Business Finance for Small Businesses
The safest option if you run a small business is to obtain business finance from your own savings. If you haven’t saved already, there are a number of ways to optimize the interest earned on your savings by utilizing a mix of safe and risky investments in fixed deposits, mutual funds or stocks.
Bank loans and credit cards can be a suitable source of funding for small businesses, provided you can convince the officials involved of the viability of your business and the acumen of your cash flow management techniques.
Government loans and support schemes are a great source of finance for start-ups, since they tend to be very liberal and accommodating.
For larger organizations, institutional finance offers the safest route because of the greater sums involved, and consequent risk of mismanagement and loss due to missed opportunities.
It is very important to get a precise estimate of the amount of money you need for your project while taking into account plan overruns.
Some of the costs you may incur could include:
- Expenses on supplies and inventory before you receive payment.
- Expenses on wages and rent.
- Expenses on capital equipment and fixtures.
- Computers, telephones and other IT assets.
- Buying a business
Give greater priority to payments that require to be made in cash and find out which other transactions can be paid in other ways. An example is not buying an office when you can rent it for now and the interest rate on your loan is less than the interest being earned on your available capital.
Think about the asset that can serve as collateral for your financial borrowings and review your decision before deciding.
Unsecured loans can be accessed for business finance through credit cards, friends and relatives, and special schemes. Companies in the UAE are encouraged by some state run banks to obtain collateral free loans so that their projects do not meet with unnecessary barriers to trade.
As a potential borrower, your lender will most likely run a personal credit check on you and your previous projects. It is best to be honest and prepared for questions about your credit history. Always keep the lender well informed of the status of your business and extensions you may require to make repayments, mentioning the sources of profit in your line of work.
Along with prudential operating practices, your business may need the help of a professional adviser, friend and guide. Investigate the services offered by the more experienced and reputed banks to ensure that your experience is safe and fulfilling.