There are many big decisions that come with starting a new business. One is choosing how to get your company the funds it needs to get off to a good start.
There are many different options out there for securing financing for a startup. Today, we’ll go over five common ones:
- Business loans: Businesses can be funded through taking on debt. Some of the choices on this front include bank loans, SBA loans and nontraditional lenders.
- Venture capital: These are funds provided to a company by an individual investor or investment group in exchange for some degree of interest and control in the business.
- Crowdfunding: This involves using a platform in which individuals (called crowdfunders) provide funds to a business with the expectation of getting gifts for their support. Gifts could include products the company makes or special perks.
- Self-funding: This is when a business owner uses personal resources (such as his or her income/savings or support from friends and family) to fund his or her company.
- Bringing in a business partner: One thing some business partners bring to the table are resources that can help fund a company.
Every financing option comes with its own pros and cons. For example, self-funding and loans generally let business owners keep a higher level of control over their business, but can expose them to greater financial risk. Meanwhile, options like venture capital and getting a business partner can carry less personal risk, but involve surrendering some control.
Also, each option can carry its own set of important legal issues to address.
So, when picking a funding option, it can be very important to be aware of all the routes available and to give careful thought to what would be the best fit given your situation and goals. Also, when pursuing a funding option, it can be worthwhile to seek out professional guidance to avoid making legal mistakes that could endanger one’s goals.
