Business funding is a consideration you should make when starting an enterprise, especially if you are low on finances. You can get such funding from bank loans, alternative lenders, crowdfunding, and factoring services. With such and more options available, it can be overwhelming to pick the best option for you and your business. However, it is essential to note that all those options fall under either of the two major categories of business financing: debt and equity financing.

Debt Financing

Debt business funding is similar to acquiring a loan. You get money from an external source and promise to pay the principal plus the interest.  You make the payments every month. The lender may ask for collateral in the form of real estate, equipment, inventory, or accounts receivable.

Types of Debt Financing

Merchant Cash Advances – This is the type of funding you get from an alternative lender. The lender then requests a certain percentage of your credit and debit card sales.
Bank Loans – These loans have low-interest rates, but they take some time to be processed.
SBA loans – These are federally regulated loans offered through banking partners. The most common loans in this category are 504 and 7(a) SBA loans.
Business Credit Card – These are similar to your credit card. However, they have more benefits for a business, including rewards not found on business credit lines.
Credit Lines – Here, you get a lump sum, but you only withdraw the amount you require. Interest is charged on the amount you have spent.  

Equity Financing

Equity financing means that you offer a part of your business to willing investors who hope to get a share of your business’s future profits. Venture capitalism and equity crowdfunding are some of the ways to obtain this business financing.

Types of Equity Financing

Angel Investors – These are wealthy individuals willing to inject substantial amounts into your startup in exchange for shares in the business or convertible debt to get their money back.
Equity Crowdfunding – This involves leveraging crowdfunding platforms to sell some company shares to many investors.
Venture Capitalism – Venture capitalists, are groups or individuals who invest their money in different startups, particularly the riskiest ones.

Starting a business is a good idea, but you need money to be successful. Know which one suits you better between debt and equity financing, and get all the financial help you may need by contacting Triport today.