Raising Capital for Startups: What Are Your Options?
Frequently, a client calls our office to discuss the options for starting a business. Clients and prospective clients calling our office get extremely excited to get their business idea off the ground. However, one aspect that is always difficult with every entrepreneur and business owner is getting the funding for their business.
Here are your options for your business startup when it comes to obtaining funding and raising capital.
Using Your Own Funds
Although, this is not a common idea, you can always fund your new business startup with your own savings, retirement savings, and other personal funds. However, before you commit this action with your business startup, make sure you speak with a qualified professional to determine if using your own funds is the right decision.
Loans
Another option is to obtain a bank loan. However, this can prove to be difficult because banks tend to view business startups as a risk. Afterall, 90% of all businesses fail in the first 5 years. Therefore, banks will want you to put up some form of collateral. For example, you may need to take a second mortgage on your home as security for the business loan. Many banks will not simply let you personally guarantee the loan as security. Also, many banks will base their lending criteria on your personal credit score. Therefore, seeking funding as a business startup from a bank or financial institution may not be the best choice for you.
Angel Investors
Another option is to seek out an investor in the form of an Angel Investor. This is a type of investor that provides private capital investment for your startup business to get off the ground. Although there are a wide variety of Angel Investors, the most serious Angel Investors will not invest less than $1 million. In addition, Angel Investors tend to want to invest in emerging technologies. However, as with any type of investment you seek, there are always downsides. In many circumstances, Angel Investors will want to see immediate return on their investment and will want to see a track record of success with previous businesses. If this is your first business, obtaining an Angel Investor may be difficult without a history of prior business success.
Venture Capital
Finally, you can seek out Venture Capital Funds. A Venture Capitalist is a person who will invest in your business for a percentage ownership of your business. This is similar to an Angel Investor, but a Venture Capitalist may be a little riskier with their investment strategy and philosophy. However, Venture Capitalists are investing in you and your idea, and therefore, tend to invest in emerging and new technologies.
For more information
If you are a business owner or interested in starting a business and looking for ways to generate additional capital for startup or growth, please contact our office at (513) 241-0400 to schedule an initial consultation. You can also fill out the contact form on our website and one of out Corporate Attorneys will follow up shortly.