Funding in the form of debt has the advantage that the business owner does not give the investor the right to control the company. While on the other hand, there is an obligation to repay debt plus interest on the loan. The most common source of debt financing is a loan or credit from a bank.
Debt financing will require a guarantee in the form of assets ( collateral ) or guarantee in the form of contracts or bills to customers, depending on the type of credit. Bank credit generally has several options depending on its designation.
For the need for procurement of fixed assets, the type of credit is investment credit. For land, buildings, equipment and other business facilities are assets that will be pledged as collateral with assets obtained from the credit.
Investment loans have a payback period of usually more than one year. In addition, there are types of working capital loans, namely loans specifically for the need for procurement of supplies, or production operations or execution of work contracts, which payback periods in a monthly period. Alternative funding apart from banks is through an online business loan marketplace platform ( peer to peer lending platform).
Currently, this business loan marketplace platform only provides invoice financing, namely funding for bills to customers, which means that funding will only be disbursed if the company has completed the work and invoiced the customer. This funding or bud funding cannot be used for business needs during the period of starting work or starting a business, but it can be a solution if the payment period from the customer is long enough.
Funding Equity (E quity Financing )
Equity funding is funding that has the character of no obligation to return the paid-up capital by investors but investors will have a voice or special rights such as being able to influence control over the company. The greater the percentage of investors’ shares, the greater the company’s control.
For equity funding, the company provides profits to investors in the form of dividends, namely the distribution of business profits and/or an increase in the value of the company which is reflected in the increase in the value of investors’ shares.
The easiest source of equity funding is to get capital from friends or family in exchange for company shares. The most difficult level of a company in obtaining equity funding is by way of an IPO ( Initial Public Offering ) or going public to become a public company.
Being a public company means that the company obtains funds or capital from the public through the stock exchange. The advantage of getting capital by becoming a public company (tbk) is that there is no obligation for the company to return investors’ capital such as debt.
The convenience obtained by a public company is not without conditions, being a public company means being required to be transparent about its business and financial information as well as complying with capital market regulations.
One of its obligations is to make financial reports and annual, quarterly and annual reports that are mandatory to be announced to the public. Public companies are also required to continue to increase business scale and company profits so that the share value continues to rise and distribute dividends consistently.
For SMEs that do not require large capital and complicated processes such as becoming a public company, the alternative is to seek capital on an equity crowdfunding platform .
Tips for getting funding
Then how to be successful in getting loan funding? The tips are to prepare a credit score, including by maintaining cash flow in bank accounts, having a solid business plan with a business feasibility study, and ensuring the existence of legal ownership of assets as collateral for debt, and preparing financial statements. An audit of financial statements can improve information on the company’s finances and business performance so as to facilitate credit analysis and granting credit to companies.