Many entrepreneurs exhaust all of their own money before they even start looking for outside investors for start up business funding. If you were lucky enough to convince some of your family and friends to invest in your new business, there is still a good chance it was not enough money. That means you have to find other sources of funding in order to take the business to the next level which may include buying inventory, purchasing equipment, or making the next 6 months of payroll. The thought of your business never getting off the ground or coming to a screeching halt is distressing to say the least.
Fortunately, you have plenty of options when it comes to funding sources. Given the complexity of convincing financial institutions or private investors to invest in a tight credit market and limping economy, it is always best to get professional assistance. Gaining access to a network of funders is critical, and like any “private” club you need an introduction.
What are these sources of funding?
- Angel investors and angel organizations – Earthly angel investors are really private investors willing to invest their own funds in fledgling businesses. The often invest in the form of equity or convertible debt. They truly seem like angels when you need funding, but these angels are investing because they believe they can get a higher rate of return by investing in your company as opposed to investing in traditional financial tools. Many angel investors are also interested in promoting businesses in which they have personal experience or a special interest.
- Business Loans – These are loans from financial institutions like banks. Despite what you read, the banks are lending to businesses. But since credit is still tight due to the recession, you improve your chances of success by accessing those banks with a record of lending through the recession. That is where a professional can be of invaluable assistance in locating funds domestically or globally.
- Venture Capital – Venture capital is money that is loaned by a venture capital firm or individual. Larger amounts usually come from firms. These firms are often looking for start-up businesses that have high potential for fast growth and early returns. They take an equity position in your business meaning the venture capitalists take part ownership. But there are innumerable ways to structure the financing and equity arrangements so don’t rule out this type of funding as a possibility.
- Equity Partners – This is start up business funding in which private individuals invest in your firm in exchange for part ownership. Ownership can take the form of stock ownership, but in some cases the investor may want to be involved in a way similar to a partner.