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Get Started

Receive funding and continue operating your business

Personal Financing

Self Funding

Many entrepreneurs have personal assets that they use to finance their ideas. Using personal financing or “bootstrapping” is the first source to raise capital. You can fund your business by using your personal checking and savings accounts, credit cards, and retirement funds.

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

Friends and family are a great source for financing startups. They are a group that would love to see the entrepreneur succeed. This type of financing can be obtained faster than traditional banks or angels because it is based on personal relationship.

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.


Equity Funding

Angels

A large number or individuals invest in a variety of entrepreneurial ventures. These individuals are usually successful entrepreneurs, attorneys, doctors, etc. who have significant business experience. Angel investors do not make investments in established marketplaces. They are investors that are taking a big risk because they are investing in the beginning stages of the business. With big risk they expect big rewards, and this makes angel investors extremely demanding.

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.


Venture

This type of financing is an exchange of money for a piece of ownership in the company. Entrepreneurs can raise money through selling common or preferred stock to investors. As opposed to debt financing, equity financing transfers the risk from the entrepreneur to the investor.

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.

SEC Regulations

Any offer to sell securities must be registered with the Securities and Exchange Commission (SEC) or meet an exception. There are three rules providing exceptions from the registration requirements contained in Regulation D (Reg D). This allows some companies to offer and sell their securities without registering the securities with the SEC. Contact Fisher Law Group for more information about Rules 504, 505, and 506 of Reg D.

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.

Funding FAQ

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Debt Funding

In the simplest form, debt financing is a loan. This form of capital is usually offered by banks, but can also be offered by venture capitalists.

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.


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Government Programs

There are a few government programs that may provide financing to small businesses. The advantage of applying for government sponsored programs is that it offers more flexibility than other loans that are offered by traditional lending institutions.

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.

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