Financing is based on borrowing money from external lenders, and banks are one example of loan providers, and like other things in life, the borrowing process involves both positive and negative aspects. In addition to the possibility of choosing between long-term or short-term loans, while on the negative side, the repayment of the loan begins shortly after its approval and is determined by a certain period of time, and the repayment process drains the cash of the project, which impedes its development process, in addition to the possibility of being forced to mortgage something. of the project assets as collateral for the repayment of the loan.
Stocks and shares
The equity financing system is based on the process of investing private funds, or funds from other investors in return for owning stakes in the project, and this financing can be benefited from the premise that it does not require immediate repayment and thus is less risky than the loan, and at the same time it does not affect the development of the project as it does not drain Profits, and the presence of a group of investors contributes to increasing the skills and credibility of the work, and on the other hand, the presence of investors as partners in the project gives them some eligibility to make decisions related to the work, in addition to the difficulty of finding a suitable investor to work, which requires time and effort until the task is completed.
There are many parties that can be approached in order to obtain a loan or debt to finance small projects, including the following:
Retailers: Retailers can be resorted to in order to purchase the equipment needed for the project in exchange for commercial credit through a financing company, and although interest is applied through this method, some merchants allow an interest-free payment period.
Suppliers: This method provides the possibility of delaying the payment of the value of goods under the guarantee of trade credit.
Family and friends: The presence of strong ties between family members or friends is the possibility of relying on this to borrow investment money, with the need to realize the risk of losing money.
Financial institutions: These institutions provide special programs to finance projects and provide them with the necessary capital, and they are a good way to start .
There are many sources of funding based on the provision of shares and shares in exchange for capital, including the following:
Self-financing: Self-financing allows the use of private resources to support the project and thus full control of the work, but with the consequences of loss as well. Venture capital: This type of financing is obtained through investors in return for part of the ownership and a seat in management, but it differs from traditional financing in that it is not considered debt.
Stock crowdfunding: This method is based on the principle of collecting investment money in the form of small amounts from a large number of investors in exchange for an annual return through the stock exchange.
Government: The government provides assistance to investors in the form of free or almost free guidance or services, and in certain circumstances provides grants for development and expansion.
Investors: They are individuals from the wealthy classes and usually search for sources to achieve a high financial return.