Welcome to WatchMojo.com. In today's business school bit we take a look at different forms of financing, if you are looking to start your own company. Now definitely not everyone looks to starting their own business, and even those that do, sometimes realize that it is a tougher challenge in what they actually wanted. Now, starting a business is risky, starting a business is stressful, but if you can play your cards right, then just maybe you might be on your path to personal and professional success.
But before you do, you need to consider the different sources of financing that are right for your business. There are essentially two forms of financing. One of them is debt, and the other one is equity. Debt is a risker form of investment, in the sense that, while you do not give up the share of your company, you are personally responsible for the money that you borrow. In other words, if you want to accept the personal loan from a family member, a spouse or a distant cousin, that's fine and dandy, but if your business were to suffer, and you close the doors of your business, you might be personally liable for that loan.
The second form of debt loans is basically credit cards. Now nobody is really telling you to go out their and start your business using credit cards, sure filmmaker Kevin Smith did when he made Clerks, but chances are that that is one thing you want to avoid; mainly because the interest rates that you get charged are very high, and second of all, if once again God forbid, your business suffers and goes bankrupt, it will effect your credit rating for up to seven years. So that's definitely not something that you want on your record.
The third form of debt borrowing is essentially credit lines. Credit lines are conceptually very much similar to credit cards. The only thing that's different about a credit line, is that, a) the interest rate that you pay should be lesser. Credit lines are fine if the amount of money that you need is not that much, and that you anticipate being able to generate some cash flow in the foreseeable future. But otherwise, whether it's a personal loan, a credit card, or a credit line, it's money that you are borrowing. So you will have to pay it back sooner than later. That has been one form of borrowing that you can do, which is essentially debt.
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