Sourceof funding 1: Venture Capitalists.
A venture capitalist is aninvestor who gives a small amount of money to small or growing businesses to helpthem start-up properly. Venture capitalists are willing to invest in companiesbecause they can earn a huge return for their investments if these companiesare a success. Venture capitalistscan also experience very major losses when the companies they invest in fail,but these investors are often so wealthy that they can afford to take the riskswithin the funding of young, unproven companies that show that they have agreat idea and a great management team. Venture capitalists mainly look forstrong management teams, a large potential market and a very unique ordemanding product, or service with a strong advantage. They also look foropportunities in industries that they are familiar with, and they look for thechance to own a large percentage of the company so that they can influence itsdecisions. The venture capitalist usually takes a big share of the company andalso a large share of the company’s profits. But if they fail then they tooalso have to pay for the loss as they share part of the business.
An example ofa venture capitalist firm is Global Founders Capital (www.globalfounders.vc). Theyare global investors that have a track record of building billion dollarbusinesses around the globe including platforms like, Facebook, LinkedIn, etc.they have major offices in Europe, Asia, Latin America and USA. Sourceof funding 2: Bank Loans.
A bankloan is a fixed amount for a fixed date with regular fixedrepayments. The interest on a loan tends to be lower than an overdraft. The interestrate is usually 2%-5% Apr and the period in which the payment is to be paid isoften 3-10 years. However, a bank loan doesn’t provide more flexibility than abank overdraft. The business commits to meeting the bank loan repayments andinterest otherwise the interest would increase the interest amount, you mayhave to pay a fee around £30, depending on the amount you loaned, and thelender can also report you to credit reference agencies for your missedpayments. An example of a loan is: A business borrows £40,000 for 36 months(3yrs) at an interest rate of 73% APR representative.
This means that the totalamount to be repaid is £44,506.80. You would then have to pay £1,236.30 everymonth. Sourceof funding 3: Bank Overdrafts.
A loan arrangement inwhich a bank extends your credit up to a maximum amount which is called anoverdraft limit. A current account customer can write cheques or makewithdrawals. The most common form of business borrowing, an overdraft is a typeof revolving loan where deposits are available for re-borrowing, and interestis charged only on your balance goes below zero, this is an overdraft. It is ademand loan; the loan can be cancelled at any time by the lender at itsdiscretion, without any warning notice or explanation. If the overdraft is securedby an asset or property, the lender has the right to access savings accounts ortake you to court in the case that the account holder does not pay. Forexample, you might go to a tech shop and want to spend £8,000 on 2 T.Vs, asound system, a projector, and a gold plated smartwatch, but you only have£2,000 in your account, you would be allowed to go a certain amount below zero.If your balance goes to £-6,000 youmight have to pay the bank back at an interest rate of their choice.