Funding a startup with your own money and borrowed capital can be an extremely stressful time. Luckily, for some entrepreneurs, there are investors in the market looking to help out and reduce the stress. Angel investors provide a means of funding that is perhaps as stress-free as possible. In simple terms, angel investors invest in the entrepreneurs who are starting a business rather than the viability of the business itself. More focused on helping the business take off rather than the potential profits, angel investors are the opposite of venture capitalists.
This source of investment capital works when high net worth individuals or a firm purchases shares of a private company or acquires control of a public company with the idea of making it private again. A private equity firm operates on the premise of debt, restructuring and reselling to make money.
Investing is about taking a risk and hoping that it pays off in the future. Venture capitalists gamble on startups and small businesses that they view to have long-term growth potential. Venture capital typically comes from well-off investors, investment banks and other financial institutions. For new companies (under two years), funding provided by venture capitalists have become increasingly popular and almost essential..
Another option for funding your small business idea is debt financing. There probably have been countless terms and processes that are new to you, and this one may be no different. However, debt financing is a glorified term for loan. This form of small business funding requires the business to repay the principal plus interest to the lender (typically a bank). There are a variety of loan options when it comes to financing your small business.
Another way to help get your startup up off the ground (financially speaking) is through small business grants. These grants are an excellent source of government funding because they are essentially free money- no repayment, no interest rates, and no required credit scores. However, if free money seems a bit too good to be true to you, you are right. Grants do come with a few drawbacks, but that does not make them negative.
SBA Loans/Bank Loans
The Small Business Association is dedicated to helping entrepreneurs, and small business owners make their dreams a reality by providing access to specific loans. While the SBA does not directly loan money, they do, however, guarantee the loans (all or part) that are provided by lenders making the lenders more willing to fund small businesses.