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Sourcing financial assistance for your business

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30.MAY.08

Knowing where to find suitable finance for start-up and business expansion is an essential part of planning for the growth and success of your business. Obtaining capital from the right source can make the difference in whether or not you would be stuck with repaying high interest rates.{{more}} Business owners need to recognise that there are sources that may not give them money but which help them to save money either through free or subsidised services. Before you decide on which source you would use, you should do a detailed analysis of how borrowing from or using this source would affect your business. Make sure you are aware of all implications, even if you are borrowing from relatives or friends or using your own resources.

Using Your Personal Resources:

Many persons would look to their personal resources/assets as the first source of financing for their business as this is perhaps the easiest and quickest form of obtaining finance. There are no legal requirements and you do not have to pay back any interest. Having something to invest also puts you in good stead with the financial institutions if you need additional capital as most financiers like to know that you have personal assets to invest into the business. There are many different forms of personal resources that you can use. These may range from savings and property, to life insurance policies.

Borrowing from Family and Friends:

Borrowing from relatives and friends is another source of financing that can be considered. Although these persons are close to you, you should treat the money you borrow from them as you would if you obtained it from a recognised source of credit. If necessary draw up a legal agreement outlining the terms and conditions of the loan. Some relatives and friends who lend you their money may want to interfere in the running of your business. Having an agreement would help to deal with this problem should it arise. You may be well advised to remember the old adage ‘there is no friendship in business’. Do not take anything for granted and try as much as possible to ensure that whatever you do you do not ‘burn any bridges’ or destroy any relationships.

Borrowing from Financial Institutions:

Commercial banks and Credit Unions are major sources of funding for businesses here in St. Vincent and the Grenadines. Financial institutions require some sort of collateral or security before they will grant you a loan. In addition, many are requesting that a well-written business is presented outlining your financial requirements. The interest rates may differ; therefore, you should shop around before you settle on an institution. Note that you would only be able to obtain a loan from a Credit Union if you are a member, that is you have purchased shares. Some of these institutions may also have special programmes that could benefit your business. Make sure you enquire about all the benefits you can receive.

Developmental Agencies/Foundations

Here in St. Vincent and the Grenadines there are not many of these agencies. The National Development Foundation (NDF) is perhaps the best known example of such an agency. In addition to financing the NDFSVG offers additional services that can help businesses to develop.

Government Agencies

Most government agencies, except for the National Commercial Bank, do not offer direct financial assistance. However, the services that they provide to businesses either for free or at subsidised rates help them to save money. Two of these agencies include the Centre for Enterprise Development Inc. and the SVG Bureau of Standards. You check with other government departments to see if there are services they offer that you can use to develop your business. Remember, the more money you are able to save the more you would have to invest in your business. Free or subsidised services can also mean that you don’t have to borrow and repay interest.

Check out the SVG Small Business Association and the Centre for Enterprise Business Gateway Project Business Loans and Finance Fair next Monday and Tuesday at the Methodist Church Hall.

Submitted by the Centre for Enterprise Development Inc. We are now located in the Singer Building on Bay Street.

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