Types Of Finance Available To Fund Business Projects
Any economy will flourish only when there is good growth in trade and agriculture. Businesses provide employment, income, and products for consumption to the entire world population. Only new business projects can help a country to tackle its unemployment issues and help the country to grow. In any country, there should be encouraging conditions which should help the business houses to grow and prosper. Suppose if the policies of the country make entrepreneurs shun they move on to other countries where they find friendly investor policies and a positive environment for growth. Many countries have started realizing that such lost opportunities will hamper the growth of the nation as numerous employment opportunities, valuable foreign exchange, improvement in infrastructure are lost.
Finance is the bloodline of business. Finance should be available at the right time and at a reasonable cost. Also, finance should be utilized properly. Idle unutilized funds will eventually bring loss to the business. Not all the entrepreneurs will be having enough finance to fund their business projects. There are various means of an external source of finance which will be useful to fund the business. The following are the popular modes of business loans:
- Bank loans: Banks offer loans for purchasing land, building, machinery etc. which are long-term These loans would be secured by the assets which are purchased out of the loan. For daily working capital needs banks to provide cash credit overdraft which is a running limit. The security for overdraft would be the stock of goods and all current assets of the business. Normally the finance is available to the extent of 80% of project cost.
- Government schemes and subsidies: Most countries provide subsidies and concessions in taxation etc. for funding business projects.
- Other business houses: Large business houses support and help the setting up and growth of start-ups. They also extend patronage by purchasing the products of the start-ups.
- Foreign investments: Foreign investors look out for good investment opportunities. Hence the business can be set up with their finance or as a joint venture.
- Friends and relatives: One can source funds for business from high net-worth friends and relatives. Many individuals earn a good profit by cryptocurrency trading, online stock trading etc. Hence those who are in search of investing their surplus funds can help entrepreneurs by funding his business needs.