Being an entrepreneur and starting your own business requires the need for funds. Finances are needed to maintain sufficient working capital, to purchase assets and to get the business off the ground. So where can you get these funds from? Read on to discover the best sources of finances for your startup.
Personal Finance
Most entrepreneurs resort to their own personal savings to fund their start-ups. It’s quick, accessible and probably the only choice many entrepreneurs have.
Pros
Cons
Loans from Friends and Family
Borrowing from friends and family is quite similar to self-financing. A lot of entrepreneurs lacking personal funds turn to their family and friends for help.
Pros
Cons
Bank Loan
Whether you need a small loan for short-term needs or long-term financing to invest in assets, bank loans are one of the most popular sources.
Pros
Cons
Angel investors
During the early stages of a business, when most investors are unwilling to support a start-up, an angel investor steps in. An angel investor is an affluent individual who provides capital to a start-up in exchange for ownership equity or convertible debt.
Pros
Cons
Venture Capital
Venture capital is financing provided by opulent individuals, investment banks and other financial institutions to start-ups with long-term growth potential. It is provided in exchange for equity in the company.
The concept of venture capital is broader than angel investors. Venture capital isn’t necessarily in monetary form, it can be provided in the form of managerial or technical expertise.
Pros
Cons
You should carefully weigh the pros and cons of all the available sources of short term lending before deciding on one. Some options might seem appealing on paper, but make sure there aren’t any concealed terms in the fine print.