Bank Financing Options
Entrepreneursaspiring to establish their businesses can select bank-financingoption for a startup capital. Bank financing involves a person goingto the bank and applying for a loan. The paper explores fundingsources for business with an emphasis on bank loans.
Applicationfor bank financing involves a systematic process that aims atapproving the borrower. Loan term and interest rate are quoted to theborrower if they meet the application requirements (Qian & Yeung,2015). Bank loans are given based on the credit score, type ofbusiness, and the transaction agreements.
Angelinvestors and crowdfunding are the alternative methods that can offerfunding assistance for the development of a service or product. Angelinvestors include acquiring or seeking for financial help frominvestors in exchange for an agreed percentage of the realized profit(Qian & Yeung, 2015). Crowdfunding give room for many investorsto offer their financial support for the development of the productfor diverse gains.
AlternativeFunding Methods Comparison with Bank Loan
Abank loan is repaid based on the applied interest and the stipulatedloan term. The lender asks for specific documents and otherrequirements to ensure that the borrower qualifies for the loan.Crowdfunding and Angel investors offer financial support with the aimof acquiring a portion of the realized profit over a particularperiod (Qian & Yeung, 2015). The applicability of the business isa key factor for the angel investors and crowdfunding options.
Most Suitable Funding Option
Bankloans are the most appropriate for the development of the service orproduct. The option is convenient because a small portion of thebusiness profit will be used to make the partial payments (Qian &Yeung, 2015). As a result, the product or service development processwill not be affected. Interest rates and loan term quoted areconsiderate making it possible for businesses to meet them.
Requirementsor Documents to Obtain Bank Financing
Applicationfor bank loans involves providing self-attested copy of KYC (KnowYour Customer) documents. Entity and address of proof must beattached to the KYC copies. Moreover, audited financial statementsare provided to the bank to approve the loan application (Qian &Yeung, 2015). Bank statements or income tax returns are also attachedto the application form.
Qian, M., & Yeung, B. Y. (2015). Bank financing and corporategovernance. Journal of Corporate Finance, 32, 258-270.
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