Monday, July 11, 2016

How to Find Funding for Your Small Business


How to Find Funding for your Small Business

Having a good business idea does not guarantee entrepreneurial success. Knowing the expenses involved with starting a business lays the foundation for opening its doors. Finding ways to gain financing to assist you with covering those expenses gives your new business a fighting chance for survival. Here are some of the best places to find financing for your new business.

Family and Friends

The easiest form of lending to acquire comes from those closest to you. Presenting your new business idea to your family and friends has proven a great starting point for many aspiring entrepreneurs. With family and friends, having them as investors in your business can be tricky.

Due to their close relationship with you, they may feel the need to impart any advice they deem worthy. It is up to you to inform them of the investor relationship you expect from them if they provide you with financing for your new business. Establishing this early on will help alleviate any future questions concerning how active they should be as owners.


Angel Investors and Venture Capitalists

Angel investors and venture capitalists provide excellent funding opportunities for a viable start-up business. Angel investors and venture capitalists expect you to understand your business and show them how your business will make a profit. These investors may not have specific experience pertaining to your business, but they know how to value an investment.

They also want to maximize the return they receive on their investment. In their attempt to do this, they may require a large controlling interest in your new business in exchange for funding. Negotiate this point to ensure you keep control of your venture.


Banks and Credit Unions

Loans and lines of credit from a bank can help to get your business up and running. Banks also provide credit cards that can assist you with your new business start-up. When acquiring debt funding, be aware of the cost of the debt, or its interest rate. Your interest rate will be determined from your creditworthiness. 

Remember, debt secured with collateral will be less expensive than unsecured debt. Keep that in mind when deciding whether debt financing is right for your new business.


Conclusion

Funding is available to help you start and run your new business. Be prepared by knowing the competitive environment in which you will do business and showing the profitability of your venture gives you the best chance to receive financing.

No matter whether you are approaching a friend, a bank, or a professional investor, you want to put your best foot forward when presenting your case for your new business. Show them that the opportunity is viable and that it will provide them with a strong return on their investment.

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