Access to capital for a business, even large companies routinely seek capital infusions to meet short-term obligations
Typical Financing Sources
Personal investment
Love money
Venture capital
Angels
Crowdfunding
Business Incubators
Grants and subsidies
Loans
Personal investment
Investing your own money, either in the form of cash or collateral on your assets, to prove to your banker that you have a long-term commitment to your project
Love money
Money loaned by a spouse, parents, family or friends, considered as patient capital that will be repaid later as your business profits increase
Love money
Family and friends rarely have much capital
They may want to have equity in your business, be sure you don't give this away
A business relationship with family or friends should never be taken lightly
Venture capital
Funding source for technology-driven businesses and companies with high-growth potential, venture capitalists take an equity position in the company and expect a healthy return on their investment
Angels
Wealthy individuals or retired company executives who invest directly in small firms, they contribute their experience, network, and technical/management knowledge
Angels
Tend to finance the early stages of the business with investments in the order of $25,000 to $100,000
Reserve the right to supervise the company's management practices, often involving a seat on the board of directors and an assurance of transparency
Crowdfunding
A form of fundraising where a business asks the public for a contribution, usually in exchange for equity in the company
Types of Crowdfunding
Equity crowdfunding
Debt crowdfunding
Donation/rewards-based crowdfunding
Business Incubators
Provide support for new businesses in various stages of development, commonly inviting future businesses to share their premises, administrative, logistical and technical resources
Business Incubators
Generally focus on the high-tech sector
The incubation phase can last up to two years, after which the business usually leaves the incubator's premises to enter its industrial production phase
Businesses that were supported by an incubator have a better success rate over five years
Grants and subsidies
Funding provided by government agencies to help cover expenses such as research and development, marketing, salaries, equipment and productivity improvement
Loans
The most commonly used source of funding for small and medium-sized businesses, start-ups have a harder time accessing loans than established businesses