If you have a project you are running in your business, you may be thinking of how you are going to fund it without touching the savings from your company. External financing for the project is possible through bank loans, selling company shares, or using investments from private people. Before you go for the external sources for project funding in Kenya, there is the need to comprehend the advantages and disadvantages associated with this aspect. This article has discussed some of them.
External financing ensures that your internal resources are untouched. Therefore, you can use these financial resources for any other purpose in the business. There are a lot of expenses in business, and if you can get a chance to acquire external sources, it is the way to go so that your internal sources are set aside for paying vendors. This helps you to improve the credit rating of the company.
In some instances, a company may fail to meet the demands of its customers due to less production. The firm may fail to have resources to increase their manufacturing. With the extra cash from outside sources, additional equipment could be purchased for the growth and success of the business. The money can also be used to increase the salary of workers to motivate them or form marketing to acquire extra customers.
People or organizations providing the funds for your project can play a huge role in giving further advice on how your venture can become successful. For example, banks often give their lenders useful tips on how they can avoid making some costly mistakes. If your investor is technologically empowered, he or she can provide necessary assistance to incorporate technology in your business and how to go about the changes.
Some cons come with getting cash from external sources. The organization or person lending you the money may ask for particular shares for them to allocate you the payment. Some lenders want to be part of the team that makes the decisions regarding the business. Making this agreement may eventually lead to the company going off track with your original vision.
These funds are not given for free. The financiers will want a return on the investment. So, banks and investors add interest to the initial loan. Some of these interest rates are high such that when added to the other investment, the cost can be huge. In the end, the financing becomes a burden that you may not have planned for initially.
Acquiring funds involves a lot of time and work. You need to identify your prospective sources, create a business plan, practice your presentations, and to call various people to arrange a one-on-one meeting. These tasks can take a lot of your time and resources, and in the end, it is not a guarantee that the deals will go through.
Some of these finance solutions might require you to give out collateral from your business. It typically includes assets such as machinery, vehicles, land, equipment, or property. Although this gives the lender confidence, it leaves your properties at the danger of repossession in case your company defaults on loan.
External financing ensures that your internal resources are untouched. Therefore, you can use these financial resources for any other purpose in the business. There are a lot of expenses in business, and if you can get a chance to acquire external sources, it is the way to go so that your internal sources are set aside for paying vendors. This helps you to improve the credit rating of the company.
In some instances, a company may fail to meet the demands of its customers due to less production. The firm may fail to have resources to increase their manufacturing. With the extra cash from outside sources, additional equipment could be purchased for the growth and success of the business. The money can also be used to increase the salary of workers to motivate them or form marketing to acquire extra customers.
People or organizations providing the funds for your project can play a huge role in giving further advice on how your venture can become successful. For example, banks often give their lenders useful tips on how they can avoid making some costly mistakes. If your investor is technologically empowered, he or she can provide necessary assistance to incorporate technology in your business and how to go about the changes.
Some cons come with getting cash from external sources. The organization or person lending you the money may ask for particular shares for them to allocate you the payment. Some lenders want to be part of the team that makes the decisions regarding the business. Making this agreement may eventually lead to the company going off track with your original vision.
These funds are not given for free. The financiers will want a return on the investment. So, banks and investors add interest to the initial loan. Some of these interest rates are high such that when added to the other investment, the cost can be huge. In the end, the financing becomes a burden that you may not have planned for initially.
Acquiring funds involves a lot of time and work. You need to identify your prospective sources, create a business plan, practice your presentations, and to call various people to arrange a one-on-one meeting. These tasks can take a lot of your time and resources, and in the end, it is not a guarantee that the deals will go through.
Some of these finance solutions might require you to give out collateral from your business. It typically includes assets such as machinery, vehicles, land, equipment, or property. Although this gives the lender confidence, it leaves your properties at the danger of repossession in case your company defaults on loan.
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