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What are my financing options when starting a business?

On Behalf of | Jul 19, 2019 | Business Law

If you have a goal to start your own business, you will know that gaining funding is one of the most challenging initial aspects. Without funding, you will lack the momentum to get your business idea off the ground, no matter how great it is.

First, it’s important to recognize that not all funding is equal. You will need to analyze the long-term worth of different funding options. For example, some investment opportunities may demand that you give away a portion of your business, and others may carry high-interest rates. The following are some financing options to consider initially.

Traditional debt financing

Perhaps the most obvious option, debt financing is the act of simply taking out a loan from your bank. While private loans can come with extremely high-interest rates, there are additional options for small businesses. The Small Business Administration (SBA) offers help with loans that are much more lucrative in the long-term.

Equity financing

Equity financing can be done on a small or a large scale. For example, you may have a close friend with a small budget who believes in your business idea and wants to help you get started. They may invest a few thousand dollars in return for a small part of your business. On the other hand, venture capitalists may promise you significant sums that are hard to refuse in return for 51% of your business. It is important that you carefully consider the cost of giving away parts of your business in return for funding.

If you are struggling to decide on the best way forward regarding business funding, it is important that you understand business law and gain a good understanding of your rights.