Therefore, entrepreneurs must be creative about funding their business venture in order to see it through to success. This is not an easy task and is one of the main reasons that startups do not last. However, there are avenues to secure capital available. Here are three easy ways to do just that:
Offering Investors Equity in the Startup
In this option, a startup can seek out investors to fund the capital needed for the business to be a success. Instead of paying back this investment, however, such investors receive part ownership or equity in the business itself. This means they receive a percentage of the businesses profits. The exact percentage is worked out ahead of time. It is highly recommended to seek out legal advice when seeking to use equity to secure capital for your startup.
Going into Debt
Yes, this is the most common way for a startup to secure capital, but it does not mean it is always the best. To secure a loan, either the owner’s or the company’s assets must be used. Additionally, there is sometimes federal funding available if your startup is small enough. Despite the fact debt has a payback schedule that can be trying if your business isn’t profitable quickly enough, it also allows the owner to retain full ownership of the business unlike equity financing. Securing sound legal advice before taking on any debt is an essential step to ensure the success of your business.
While debt and equity financing have been the traditional avenues to start a business, the last ten years has seen a dramatic increase in crowdfunding options. Today, websites like Indiegogo and Kickstarter allow businessmen and entrepreneurs to go straight to the consumer for funding. When traditional financing cannot be secured, this third option is becoming more and more viable. However, due to the relative newness of many of the sites, seeking sound legal advice to protect yourself is highly recommended.
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