Monday 14 March 2011

Different Types Of Financial Funds

By Bill Underwooda


Whether one is looking for investors, loans or grants, there are a variety of different types of financial funds and what the money will be used for is important in determining what type of funds are needed. Loans and credit are great if the expense is personal, whether it is a new car, a house or that really fun trip coming up. Sponsors and investors are good for medium or some larger scale business deals while angel investors and hedge funds cover the larger scale projects, whether it is a business start up, new invention or another type of large venture.

To determine what type of funds best suites what it is needed for, a few questions have to be answered, starting with: will it just benefit the individual who is getting the money, or will the rest of the population benefit? If the individual is the only one who will benefit then a loan or credit should be used for the needed funds. If the rest of the population will benefit then it fits the business side. If that is the case then the next question that needs to be answered is: will it make money? Investors will require getting something back of a monetary value, especially with angel investors, so it is important that it will make money. If it will not make money, then it is necessary to find something to offer to companies and individuals who make a contribution and this is where sponsors come into play. However, if it will make money, then the last two important questions to ask are: how much will it make and how long will it take? The answer to this question may require some research to get an accurate result but hedge funds and investors need to know this. The other key to determining the type of financial fund needed is how much money is required? Larger sums will need to come from hedge funds and angel investors, small amounts can come from just one or a few investors.

For purchasing something for one's self, a loan or credit is obtained. The applicant shoulders the debt themselves and in some cases when a larger sum is borrowed, assets are used as a way for the bank or loan company to secure that either way they will get their money back. In a lot of cases for smaller loans though and for credit cards, a credit check is done. This ensures the applicant has a good history of keeping up with bills. Small businesses may also obtaining funding through a small business loan as well.

Events, projects and businesses that do not make a lot of money can offer sponsorships. Businesses make a contribution and in exchange get product placement, exposure or anything that may be agreed upon. This is typical for some television shows that have a very limited budget as well as very low budget films. It is a great way to raise money and help other businesses at the same time and is only limited with what can be offered by creativity.

Investors usually look at projects and businesses that are likely to make them significantly more money than they are putting in. Attracting investors is challenging and requires a solid business plan but one will the money quicker and get significantly more through an investor. In some cases an investor may want a seat on the board of directors, a portion of ownership of the company or a form of control of some aspect of the company. This is not necessarily a bad thing, especially if they are providing a significant amount of the funding and have experience in the field of the owner's business. Angel investors are at the higher end of investors, they have more money and they invest in different types of businesses, keeping an ever growing investment portfolio. They also expect a higher return on investment than your average investor.

With some projects, events and companies, a larger amount of money than a single person has may be required or the investment may be a higher risk and it would be in everyone's best interest for multiple people to shoulder the risk. A hedge fund is exactly that, a group of investors who pool their money together to fund either one project or a variety of projects.

Before starting to search for funds, determining the category that the project, business, or event best financially fits into is an important step. These types of financial funds are the most typical and almost all ventures can be placed into one of these categories. They all have their own pros and cons but are essential to helping individuals realize their visions.




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