Where and how you finance your business could be affecting your business’ success or failure. All business funding option may sound like good money at the beginning, but not the end. We update our blog every week with useful financial and business knowledge and we welcome you to subscribe to our newsletter for the latest updates. There are limited business funding choices for a Malaysian entrepreneur. Here are the eight best, from least to most attractive.
- Angel equity. If you have to sell some of your ownership stakes to start your business, start by finding a respected industry leader who is willing to invest a reasonable amount and give your venture credibility with other investors. These are people who are willing provide their business advice and their network.
- Bank loans. Banks provide short, mid, or long-term financing. They finance all asset needs, including working capital, equipment, and real estate. This assumes, of course, that you can generate enough cash flow to cover the expensive interest payments and the principal. Banks want assurance of repayment by requiring personal guarantees or even a security pledge, such as a personal property asset. One advantage about a bank is that they offer various packages and some even allow early settlement.
- Central and state government agency. A government agency always charges lower interest rates than banks. The only problem is that the application process can take up to three months, or even more. And the approval rate is as low as a bank’s. If you don’t have enough cash flow to cover your burn rate and you are not able to extend your runway, this is not the best option for you. Also, you can the SME financing approval rate before you commit your time into any of these applications.
- Customers.Request advance payments from customers. It can give you the cash that you need, with lower costs to keep your business growing. Advance payment also shows a level of commitment from customers to your business. This strategy allows you to grow faster and with limited resources.
- Vendors: Your suppliers. Request a credit term from your suppliers, and you only need to pay back when you generate sales within the credit term’s deadline. This buys you more time to boost your sales or source an alternate financing option.
- Friends and family members. If you’re lucky, friends and family members might be the most reliable investors. They won’t ask you to pledge your house and they might even agree to sell their interest in your company back to you for a small to reasonable return.
- Lembaga Hasil Dalam Negeri: No, the LHDN does not lend money. But it does allow you to deduct expenses. If you are paying lots of company taxes, it’s time for you to evaluate whether you can use your profits to expand your business – and reduce your tax bill.
- Invoice Financing Marketplace: If you don’t want to give out your company stake or commit to a long-term debt, such as bank loan, invoice financing, such as LendingStar, is the best option you have. Invoice financing marketplace helps you to convert your short-term debt into liquid cash flow and walk away from any troublesome debt collection. Thanks to the advanced technology and automation, entrepreneurs can register and submit the required documents online without spending their time preparing a hard copy. Business owners can spend more time on their business.
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