I am often asked: what is the best way to finance a new business. This question is usually followed by "So do not get into new businesses?
The answers, respectively, are: 1. there is no better way to finance a new business, and 2. Not investing in new companies, but dammit, I can not today because I left my checkbook in my other suit.
The truth is that there a variety of ways to finance a new business and in what way is best for you depends entirely on your product, its market, its financial requirements, your burn rate, and most importantly, your personal and financial situation.
So with this in mind, here are some common ways to finance a new business without hitting old Tim for a loan. Note that all methods have pros and cons and some (or most) can not work for your specific situation. No matter what financing method you choose to investigate details the ups and downs and not jump with both feet until you are sure that the land on the mainland.
Savings and investments
The first source you should consider is to build their own savings and investment. I am a big fan of himself when it's business as it does not make you responsible to others if the business fails. The trouble is that if things go Under that is your money that went down with the ship. If you're not willing to risk their capital, there is no doubt someone willing to risk anything else.
Friends and family
After clicking on your own savings and investments, entrepreneurs turn to friends and family support. It works well for some, but here is the credo I live by: Never borrow money to someone who has to eat Thanksgiving dinner. Nothing causes tension in a family like lending money that is never returned. And notice I say "pay" instead of investing money. Venture capital funds to invest. His parents give him money. They will wait to return one day even if say no. Remember, when a loved one invests in his company who invested in emotionally. It would be difficult to tell parents that their favorite son lost their savings of his life because his company was going down the drain.
Credit Cards
I funded the first time in my credit cards, which was an incredibly stupid thing to do given the fact that my company might have failed and I left with thousands of dollars of debt from credit card have lasted until the year 2099 to pay. It worked until the end for me but if you decide to finance your business in the plastic note that you must pay interest rates extremely high on the money they've borrowed and unless you hit a great shot, you'll pay for that money for many years to come.
Mortgage The Farm
Bank loans are nearly impossible to achieve if not the guarantee and a history of success in business and so many employers use equity in their homes to finance their businesses after being denied a bank loan. Same if you have more sense than building a business on a deck of letters, financial risks are no less abundant. You must pay this money if your business is successful or not, but is a good source of money at a reduced rate and interest to begin may be tax deductible (consult your accountant to be sure).
Angel Investors
An angel investor is usually a rich person, which invests in startup companies for a portion of the property. Angel investors are usually remain the major investors in a company and provide capital starting to get the business back on track. Some investors will write a check and left alone to run your business, while others consider their investment a license to "help" manage and make decisions. If you accept angel money make sure the terms are clearly defined by both parties. Angel Money always comes with strings. Of course, if these channels are in the form of an arc or a rope before accepting the verification of an angel.
Venture capitalists
These investors are angel investors as pit bulls are Chihuahuas. This does not mean all dogs that venture capital is big, bad, but they have powerful jaws you can chew your company and Spit It Out, if things go his way. Venture capital funds do not come with strings, comes with chains and locks and a stack of legal documents. VC always have the upper hand in any transaction in which they invest is just how it works and that is the price to pay for access to venture capital funds.
If your company reaches the limit of RC of money becomes a viable option, do not jump on bone Dangles first a VC before his eyes. If one VC likes the idea, others will too. Present in multiple VC and carefully consider each offer before accepting the check.
But remember, no matter how you finance your business, use the money wisely. Do not buy a plasma TV $ 1500 and $ 1,000 Hermann Miller chairs.
Have a clear plan of how the money will be used and how will be reimbursed.
And remember, much can julienne the company, but many cases, you will own the end.
Tim Knox, Entrepreneur, Author, Speaker, Radio Host Founder, The Insiders Club, Giving You The Power To Start Your Business Today http://www.theinsidersclub.com Bestselling Author of: “Everything I Know About Business I Learned From My Mama” http://www.timknox.com
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