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Things To Consider When Funding Your Own Project

08.01.2009 · Posted in Business News Article

Project funding is an obstacle all new entrepreneurs deal with, here we try to give you a few ideas about ways of funding your own business. nnTo determine the appropriate balance between the capital debt (borrowed money) and venture capital (invested money), two points should be considered. In the case of debt capital, if for any reason you cannot pay loans on time, it is very easy to be forced into bankruptcy. Moreover, the venture capital appears to involve less risk but presents another problem: the control. Unlike lenders, investors have the right to intervene in the management of the company. While most venture capital is obtained, there is greater ownership ceded to others. nnIt is needless to say the project funding source that is the safest and least expensive is that of the owner. Your own sources of funding may come from your savings or properties. If you decide that you want to share participation you may opt for other financing sources. nnOpening a business involves risks and expenses in the first stages. There is no running away from it. Debt is something that goes hand in hand with project funding. You will have creditors but you will also have investors. One inspiring entrepreneur can use good ideas, talent and creativity to market the products he or she is selling.nnUsing only your money for project funding is not always a good idea because you may be better off with a small commercial loan using your own funds as collateral. You will be able to deduct some of the funds on taxes and the loan will be inexpensive. nnAnother popular source of project funding is family and friends. They can help you create your own business when you borrow money from them but in a concept of a loan payable in the short term. You need to consider taking a few measures in order to avoid problems with your investors. nnIn order to avoid misunderstanding for those kinds of loans, you need to specify things in writing and try to formalize things as much as possible: what is the duration of the loan, what interest you will pay and when you will pay. nnWhen relatives or friends become sources of project funding to your company, you must stipulate the terms of this partnership in advance: nnTo what extent they can participate of the decisions made in the company?nnAre investors allowed to sell their shares?nnIn what way are the earnings divided?

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