The Business of Funding

The business of funding today has sadly created unscrupulous financial experts who prowl social media like vultures and spew bad advice. The result of this activity causes corporate clients seeking project funding to make unnecessary errors throughout the funding process because the information they received is far below the standards shared by true finance professionals.

Funding is the act of providing financial resources, usually in the form of money, or other values such as effort or time, to finance a need, program, and project, usually by an organization or government. Generally, this word is used when a firm uses its internal reserves to satisfy its necessity for cash, while the term ‘financing‘ is used when the firms acquires capital from external sources.

Sources of funding include credit, venture capital, donations, grants, savings, subsidies, and taxes. Fundings such as donations, subsidies, and grants that have no direct requirement for return of investment are described as soft funding or crowdfunding.

Funds can be allocated for either short-term or long-term purposes. In economics funds are injected into the market as capital by lenders and taken as loans by borrowers. There are two ways in which the capital can end up at the borrower. The lender can lend the capital to a financial intermediary against interest. These financial intermediaries then reinvest the money against a higher rate. The use of financial intermediaries to finance operations is called indirect finance. Lenders can also go the financial markets to directly lend to a borrower. This method is called direct finance.

Research funding is used for research, in fields of technology or social science. Research funding can split into commercial and non-commercial. Research and development departments of a corporation normally provide commercial research funding. Whereas, non-commercial research funding is obtained from charities, research councils, or government agencies. Organizations that require such funding normally have to go through competitive selections. Only those that have the most potential would be chosen. Funding is vital in ensuring sustainability of certain projects.

Entrepreneurs with a business concept would want to accumulate all the necessary resources including capitals to venture into a market. Funding is part of the process, as some businesses would require large start-up sums that individuals would not have. These start-up funds are essential to kick start a business idea, without it, entrepreneurs would not have the ability to carry out their concepts in the business world.

Fund management companies gather pools of money from many investors and use them to purchases securities. These funds are managed by professional investment managers, which may generate higher returns with reduced risks by asset diversification. The size of these funds could be a little as a few millions or as much as multi-billions. The purpose of these funding activities is to pursue individual or organization profits.

To raise capital, you require investors who are interested in the investments. You have to present those investors with high-return projects. By displaying high-level potentials of the projects, investors would be more attracted to put their money into those projects. After certain amount of time, usually in a year’s time, rewards of the investment will be shared with investors. This makes investors happy and they may continue to invest further. If returns do not meet the intended level, this could reduce the willingness of investors to invest their money into the funds. Hence, the amounts of financial incentives are highly weighted determinants to keep the funding remain at a desirable level.

Funders want to see that you have put in efforts to prepare your projects. It is essential that you display a sense of seriousness and honesty. It is always good to use evidence as a proof of any planning; this is a solid statement to persuade the funders that you are confident about what you are going to do. Accurately estimate all the costs that may occur including the hidden ones, and demonstrate that you are capable of managing the projects until they are fully delivered.

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