3 Easy Steps
Speak with an attorney to help you choose the proper service
Answer a few simple questions
Receive funding and continue operating your business
It is important to invest personal assets into their business because it shows potential investors that the entrepreneur is confident in their own idea. Being confident in your idea or business is important when trying to get funding from friends, family, or angel investors.
Before investing their own savings into a venture, entrepreneurs should consider the amount of funding necessary to stay afloat. If the business idea is not feasible, the entrepreneur may lose their investment.
Friends and Family
The downside to getting financing from friends and family is that they may feel they can give unsolicited advice concerning the management of the business. This might create a tension in the relationship.
Entrepreneurs should minimize the chances of damaging their relationship by repaying friends and family loans as soon as possible, even if the business fails.
On average, angel investors invest more than $200,000.00 a year. Even though angel investors are easier to acquire than some of the more formal types of financing, they may end up taking more stake in the company and executive board seats.
An advantage to equity financing is that the entrepreneur can pay back the capital throughout a fixed duration of time. The entrepreneur can focus on making their product profitable instead of worrying about paying back the investors.
A disadvantage of equity financing to raise capital is that the entrepreneur or business owner may lose partial or complete control over the business.
Institutional venture capitals make the biggest equity financing investments. Venture capital firms usually manage large funds, anywhere from $25 million to $1 billion, and they invest in high growth companies.
If your company is relying on Reg D exemption, you do not have to register the offering of securities with the SEC. Instead, your company must file a “Form D” with the SEC after the first sale of their securities. Form D is a notice that includes names, addresses of promotors, executive officers, directors, and details about the offering.
If you are interested in investing in Reg D offering, you can access the EDGAR database to see whether the company has filed their paperwork.
You should always consult with an attorney because all of these actions have legal repercussion. Let Fisher Law Group guide through the process and assist in the sale, offer, or purchase of securities.
When a new business owner uses debt financing as a means to raise capital, the owner will owe the money to the lending agent. The relationship between the business owner and the lending agent continues for the life of the loan.
A major benefit of debt financing is that the entrepreneur is able to retain maximum control of the company. In addition, the interest on the debt is usually tax deductible. A disadvantage of debt financing is that high debt may look unattractive to potential investors.
The federal government has a history of helping new businesses get started. These are some of the available government programs:
- Small Business Administration (SBA)
- Small Business Investment Companies (SBIC)
- Small Business Innovative Research (SBIR)
- Small Business Technology Transfer (STTR)
Apart from the federally sponsored programs, state and local government are increasingly more active in financing new businesses.
These resources are a great place to start for entrepreneurs and small businesses.