Capitalization: The Most Crucial Step in Starting a Business

Capitalization: The Most Crucial Step in Starting a Business

Acquiring capital is what a lot of us would perhaps consider as the most vital initial step in starting a business. Without capital, it would be virtually impossible to start the business itself. It is also the most complicated of the initial steps that an entrepreneur has to take in establishing the business.

Most entrepreneurs first look at family and friends as possible sources of funds that can be tapped as initial capital for the start-up business. This is because of two things: (1) Family and friends know the entrepreneur well, thus there is no hesitation on their part to loan money for the business, and (2) It is relatively easier for the entrepreneur to sell the idea behind the business to family and friends. A lot of start-up businesses are either family-owned or a partnership among friends.

Another option that an entrepreneur can take in acquiring capital for the business is by using a portion of personal savings. This is a convenient option considering the proprietor's access to it and its readily available nature. However, this step can only be undertaken if there is extra cash in the savings account so that future uses for it such as emergencies will not be jeopardized.

If financial aid coming from family and friends or extra cash from personal savings cannot be used as sources of initial capital, business loans are the next best option for the entrepreneur. A loan is a type of debt wherein a creditor lends money to a borrower. The borrower will then repay the said amount to the lender either in installments or in bulk but on a latter time.

business loans are being offered by a variety of financial institutions. Banks and other institutions offer loan programs that are well-structured and usually tailor-fit to the needs of the business. On the other hand, other financial institutions offer less structured loan packages that are flexible and offer more convenience to the entrepreneur.

Whether funding comes from family and friends, from personal savings or from business loans, capital is the one that will jump start the life of a business. Most of the time, a business' fate lies on how well capitalized it is. Acquiring capital is, truly, the first test of an entrepreneur's determination to succeed and resourcefulness all in the name of his latest business pursuit.

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