Any business requires the investment of time and money, and small business owners must often carefully consider the benefits and risks of their financing options when establishing a new business venture. How might business owners fund their new enterprise?
Many entrepreneurs found their business with funds drawn from their personal life. One Gallup poll from 2014 indicates that more than three-quarters of businesses use personal savings to fund their business. Whether drawing from their bank account, mortgaging their home or pulling from their retirement savings, this can bring new challenges to business owners’ personal finances while they face the challenges of getting their business off the ground.
Loans or credit
Banks, credit unions and the Small Business Administration may provide loans to help businesses establish themselves. In order to get these funds, entrepreneurs must often go through a lengthy application process and outline their plans for the business to give the lending entity confidence in their ability to repay the loan. Some businesses also turn to credit cards to build their company’s credit.
Grant programs can be particularly competitive, but they offer you access to money that your business would not have to repay.
For businesses with significant growth potential, seeking venture capital from investors can be a way to finance the founding of a new company. Generally this investment comes at the cost of allowing these investors some measure of control over the company and its profits.
For projects that may appeal to the general public, crowdfunding campaigns are a growing way to fund a business. These campaigns can be time-consuming and require marketing savvy to spread the word about the campaign, but they can offer additional funding options to entrepreneurs.
When considering the risks and rewards of each type of funding, it may be important for entrepreneurs to enlist legal help. With experienced guidance, small business owners can choose the funding option that best fits their business and its goals while protecting the company’s future success.