Business Capital: Where to get the money

There are two basic sources of capital for your business: internal and external. Internal source is your personal savings, while external source may come from financial support of friends and relatives, and from credit, loans or mortgage from a lender such as a financial institution.

Should we finance our start-up or business expansion capital fully? Loan Guru expert suggests for start-up business, we should use a combination of both personal savings and borrowings. Its a thumbs up if the bulk of the capital comes from an internal source. In finance, this is called debt equity ratio. For business expansion, it is more complicated. There are more factors involved, especially to be considered is the industry, is the business now ready to expand or is the existing business ready to cover the probability of losses in case the expansion fails. It basically comes down to the knowledge or experience of the management.