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.
Still, it will be ideal to look for external funding if your finances are not able to cover the entire project. For example, low input means that you get low output. You may thus want to increase the manufacturing sector so that you produce more to meet the demand. Hence, you can look for the funds to finance this plan. Besides, you may use the money to buy equipment, land, and machinery.
The organizations funding the scheme can help give expert advice. For instance, the bank has financed a lot of small businesses. Therefore, it can guide you on how you will avoid various pitfalls so that your plan is successful. If you have an investor with technological skills, they can offer technical advice that you incorporate in your projects to make more significant 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.
Loan lenders and investors give out money expecting to be given back the cash with interest. Some of the lenders set high-interest rates that make it highly expensive to pay it back. Accepting these funds may prove to be a burden you did not account for.
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.
Still, it will be ideal to look for external funding if your finances are not able to cover the entire project. For example, low input means that you get low output. You may thus want to increase the manufacturing sector so that you produce more to meet the demand. Hence, you can look for the funds to finance this plan. Besides, you may use the money to buy equipment, land, and machinery.
The organizations funding the scheme can help give expert advice. For instance, the bank has financed a lot of small businesses. Therefore, it can guide you on how you will avoid various pitfalls so that your plan is successful. If you have an investor with technological skills, they can offer technical advice that you incorporate in your projects to make more significant 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.
Loan lenders and investors give out money expecting to be given back the cash with interest. Some of the lenders set high-interest rates that make it highly expensive to pay it back. Accepting these funds may prove to be a burden you did not account for.
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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