In case you have a business, and you intend on starting a project, you may find the need to finance it without using the money of the company. You can find external financing through acquiring bank loans, seeking private investors, or selling a few company shares. Nevertheless, before you consider such project funding in Kenya, it is imperative you understand the merits and demerits of receiving such funds entirely. Below are 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.
Another benefit of acquiring funds from external sources to finance a project is that you get advice from experts. The bank, in particular, has loaned numerous businesses. Hence, you get guidance on how you will use the loan and avoid pitfalls. A technologically empowered investor may as well advise you on way of incorporating advanced technology to boost your production.
Getting additional sources to provide funds has a few demerits. For example, individuals investing in your project may ask for a particular stake at your firm so that they can give you the money. In the agreement you make, the investor may want to make decisions in your business. This may significantly impact your original vision of your firm.
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.
Presented with several solutions to the financing, you may notice that you need collateral from your company to get the money. Collateral can be any property you own be it a vehicle, land, equipment, or a machine. This puts your valuables in the risk of being possessed by your lenders in case you fail to pay in time. You can incur high losses from this.
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.
Another benefit of acquiring funds from external sources to finance a project is that you get advice from experts. The bank, in particular, has loaned numerous businesses. Hence, you get guidance on how you will use the loan and avoid pitfalls. A technologically empowered investor may as well advise you on way of incorporating advanced technology to boost your production.
Getting additional sources to provide funds has a few demerits. For example, individuals investing in your project may ask for a particular stake at your firm so that they can give you the money. In the agreement you make, the investor may want to make decisions in your business. This may significantly impact your original vision of your firm.
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.
Presented with several solutions to the financing, you may notice that you need collateral from your company to get the money. Collateral can be any property you own be it a vehicle, land, equipment, or a machine. This puts your valuables in the risk of being possessed by your lenders in case you fail to pay in time. You can incur high losses from this.
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