Funding Opportunities for Your New Business
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One of the most difficult tasks for a new entrepreneur is raising enough startup capital to market their business ideas. Through careful research of funding options, the new business owner may find several alternatives that may be beneficial for his/her unique situation. From asking family members and friends to angel investors and government agencies, there are certainly many ways to raise business capital. However, the entrepreneur must have a firm commitment to repay any debt owed since being debt-free will avoid accumulative interest costs. It can also be beneficial to consult with other small business owners to see how they raised their startup capital.

Bank loans
Many financial institutions provide some type of small business loan. In order to get funding from a bank, the prospective entrepreneur will need a good credit history or a co-signer to be approved. Often times, financial institutions will also request a business plan and financial figures of the prospective company. These documents will prove that the new business will generate enough cash to make the required monthly loan payments. While each bank's requirements may differ slightly, a good credit history, solid business plan, and prepared financial statements are mandatory to secure a small business bank loan.

Family and friends
Many entrepreneurs are able to raise startup capital for their new businesses simply by asking friends and family members for financial help. One good thing about family and friends is that they often want the entrepreneur to succeed in their new business and can usually give the needed money almost immediately. While this may not be a viable option for everyone, it is one guaranteed way to quickly raise startup capital. Of course the entrepreneur needs to be careful about how the agreement is set up since it may result in relationship problems with the people they know. It will be beneficial to treat each friend and family member who gave money as a business relationship, explicitly expressing the interest rate and how the money will be paid back.

Federal and state grants
The Small Business Administration is a federal agency that can help entrepreneurs find funding opportunities for their new businesses. While the SBA does not directly provide any type of funding for entrepreneurs, they do offer a wealth of resources, including a list of federal and state grants. These listings are usually very beneficial for new business owners with prospective non-profit organizations. It can also benefit entrepreneurs who plan to open businesses in areas of education, public housing, research, and minority groups. Federal and state grants are highly competitive amongst applicants, and due to the nature of the grants, it pays to explore this option when looking for funding.

Angel investors
Angel investors are high net worth individuals who often provide the amount of capital needed for most small businesses. One advantage of obtaining angel capital is that it is offered almost immediately with no expensive monthly fees or payments. With no monthly payments to worry about, the entrepreneur can focus their energy on their new business and how to make their company grow. Another benefit is that angel investors use their experience and act as advisors to the young company in guiding it towards success. In return for their committed capital, angel investors often expect a large ROI, stock options, and a seat on the board. For those who do not mind the investment exchange, angel investors can provide the needed startup capital for new entrepreneurs.

Venture capitalists
Venture capitalists are similar to angel investors in that they can provide the needed funding for most startups and later-stage companies. However, rather than use their own personal capital for investments, they use a pool of money from wealthy individuals. They also differ from angel investors in terms of the amount invested. While angel investors can provide a maximum of $500,000 to $1 million or more (especially in angel groups) venture capitalists are known to invest several millions of dollars on one project. They, too, expect equity in the form of company stocks, a board seat, and a large ROI in return for their invested money.

Home equity loan
When an entrepreneur borrows money from their bank and utilizes the equity in their home as collateral, it is referred to as a home equity loan. As with every financing option available, there are pros and cons. One positive aspect of a home equity loan is if the entrepreneur has a lot of property, they will likely be able to obtain more money for their new business. However, if the business fails, the entrepreneur may end up losing both the business and their home. This option is quite risky, and entrepreneurs should only resort to home equity loans if they know for sure their business will succeed.

401k and IRA
Entrepreneurs can also raise capital for their new businesses by borrowing against their retirement plans, such as their 401k or IRA. While the option of immediate approval may be tempting, the money must be paid back with interest over several years. When people borrow against their retirement plans, they are often giving up the tax-free privileges of those plans, leaving them with less money and time to earn interest for retirement. Obviously the danger involved with this practice can be rather drastic, so the entrepreneur needs to make sure their new business will be successful. If the business fails, then the borrower will still have to pay the loan back or face tax fees and other percentage penalties.

There are numerous funding opportunities available for new entrepreneurs. It is important for anyone who is considering raising capital for their new venture to conduct a fair amount of research in order to ensure their new business will not be jeopardized due to a poor funding option.

Sources of funding are available for practically all types of new businesses. By exploring these different options and selecting an effective form of business capital, the entrepreneur will be able to find solutions to make their business ideas a reality.

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