Ideally, if your business has been booming, you can reinvest your profits back into the company. In business parlance, this is called retained earnings. This way, everything is self-sustaining. You don't need to deal with anyone else. You can continue to grow your business on your terms.
But if you don’t have exactly this capability, you can consider external financing. Conventionally, you can get it through debt or equity financing with venture capital or bank loans. These are also known as loans and investments, respectively. There are also emerging types like revenue-based financing and alternative business financing options like merchant cash advances and invoice factoring , which are useful for those with limited credit history. Businesses can also apply for grants or launch crowdsourcing campaigns.
Different entities and organizations can give you access to paytm database these forms of financing. You can get loans from banks and lenders. Venture capitalists (VCs) and investors can offer you seed and initial funding in exchange for equity.
Ecommerce-specific financing platforms can give you access to any of these financing methods or a combination of them. They can even provide businesses with customized plans for the area of growth their business explicitly needs.
Let's see how each one works.
Debt financing is probably the most common option out there. This is how loans work. A lender gives you money on the condition that you pay it back over a period of time with interest.
For example, you take out a $1,000 loan at 1% simple interest and you have to pay it back in one month. That means you have to pay the lender back the $1,000 principal and $10 interest after one month. That's about as basic as loans can get.
Unfortunately, most loans are not that simple. Most borrowers need significantly large sums and a long period of time to pay them off. This is why typical loans, such as home loans, car loans, and business loans, are amortized. An amortization schedule lays out how fixed payments are spread out over some time. A portion of each payment is applied to the principal and the rest to the interest. Amortized loans may seem attractive since you would know the amount you have to pay each month.