You’ve probably heard the old saying that it takes money to make money. And when it comes to starting a business, it typically rings true. It doesn’t matter whether you’re starting an online company and need a website, employees, and equipment, or whether you’re setting up shop in a traditional brick and mortar location. The majority of businesses need startup capital to get off the ground. The question is, how do you get it?
I’m Neil Fridman with the Fridman Law Firm PLLC. Today, I want to tell you about the best ways you can obtain startup capital for your business.
Small business loans
Let’s start with small business loans. Small business loans are among the most traditional ways to obtain capital for your business. And depending on what type of business you own, there are several options available to you, with the most traditional being a small business line of credit.
Small business line of credit
A small business line of credit is typically used to help manage cash flow and unexpected expenses, with one of the perks being that you do not get charged interest until you actually draw down on the funds. These loans are typically offered as unsecured debt, which means you do not need to put up collateral.
However, you have to be wise if you choose this option, as most lines of credit require annual renewal. If the line is not renewed at the end of the annual term, you will be required to pay it in full.
There are other options as well, such as working capital loans that allow you to manage fluctuations in revenue, U.S. small business administration or SBA loans, and even equipment loans to help you outfit your business.
Ultimately, the key to getting small business loans will be knowing what is available and how to obtain the option that best suits your business needs.
Venture capital firms
Venture capital firms aren’t new, but they truly came of age in the Silicon Valley boom. Now, wherever you live, you will likely have access to a venture capital firm that is looking to invest in new businesses. VCs can provide capital, strategic advice, partners, and more.
But they don’t hand out their capital services to just anyone. VCs typically look for startup businesses that have high growth potential. What industry you’re in, how old your company is, and where you’re located, they all play a factor in whether or not your business is a good candidate for a VC firm.
However, VCs aren’t the only ones funding startups. Angel investors are also lining up to invest in startups they believe have huge upside potential. Angel investors include famous entrepreneurs, like Gary Vaynerchuk, but they can also be friends and family members who might be interested in pitching in to fund your business.
An angel investor is anyone who sees potential in your business, and is willing to contribute capital toward getting it off the ground. The key to finding solid angel investors is having a good network and understanding whom to approach and how to present your business idea. Some of the most successful businesses in the world have received funds from angel investors, so this might be the right approach for you.
If you’re starting a business
At the end of the day, raising capital for your business is all about knowing your company and understanding how to approach the right investors. If you’re starting a business and have questions about how to raise capital, please send me an email at [email protected]. I would love to help.