WHY INVESTOR FUNDS ARE BETTER THAN GETTING A LOAN

INTRODUCTION

Entrepreneurial Business starters as well as those expanding find it difficult to decide the source of their business capital between loans and giving the business stake to investors.It is important to note that there are many advantages that will accrue to an investor who opts to go for investor funding as opposed to loans.This article gives an insight and educates established as well as budding entrepreneurs why they should look for investor funding when starting as well as expanding their business ventures.This is therefore in a bid to convince them that it may not lead to loss of control as far as the business is concerned.

a)INVESTORS OFFER MANAGEMENT ADVICE.

Choice of the right investor will be helpful since they have the experience on how to effectively run a business.They can give valuable assistance and strategies especially during difficult business periods.Most of these investors have run businesses before and properly understand record keeping,emerging trends in business as well as how to effectively manage challenges that a business may face.Remember that profitability of a business depends on how properly it is managed.

b)OFFER NETWORKING ASSISTANCE TO THE BUSINESS.

Some investors are highly connected and can connect your business to the right group of suppliers.This ensures that one is able to obtain the best commodities to consumers hence ensuring prosperity of the business.They can also provide sales channels and new clients to the commodities sold.This ensures that the market is expanded and one is able to make higher sales volume.With this increase in sales profitability is guaranteed.

c)FLEXIBLE PAYMENT TERMS.

The payment terms of finance offered by investors is much more flexible than loans.This is because these investors understand business cycles and understand that businesses may not make profits all the time.They may give longer repayment period as the business reaches its break-even.This is convenient to the entrepreneur.

d)RISK OF BANKRUPTCY.

In case the business goes broke,the owner may not necessarily have to pay for investor's money especially where the risks involved were properly explained before the financing was issued.This is unlike loan financing which have to be paid back regardless of what happens to the business in question.

e)AVAILABILITY OF FOLLOW-UP FUNDING.

Some investors are willing to give more funding in case the initial amount given is not adequate or there is a setback.This is especially advantageous to businesses that are starting and hence are still under financial constraint as they try to break even.Investor funding is therefore advantageous in this regard.

f)AVAIL FUNDS FOR BUSINESS GROWTH.

As opposed to loans which have to be serviced regularly depending on the agreement,equity financing may not require this.This ensures that the small profits made are committed to running and expanding the business venture thus ensuring its growth and prosperity.

g)COMMITMENT TO GROWTH.

With most investors overseeing the business growth one is bound to ensure that they run the business with utmost professionalism to ensure it grows and expands.The growth is also facilitated by the strategies and ideas given by the investors.With hard work the business is assured of growth and prosperity.

written by: ProfDavis