Options for Funding a New Business
Starting a new business usually takes some capital (and almost always hard work). When you’re ready to begin your venture, but don’t quite have the funding to sustain it, you need to explore options for raising capital. Before approaching potential investors, it’s best to have your ducks in a row. Below are some potential resources, some of which are conventional, for funding a new business to help you get started.
Loans are traditional choices for a business in need of funds. Before taking out a loan, make sure that the terms are appropriate and that the responsibility of the loan falls directly on the business. Avoid taking out a personal loan. Some new businesses may have trouble securing a loan, especially if they have not yet established credit. This could make the loan interest rate significantly higher, which may be unreasonable for your business venture. There are other options available.
Grants are monies accessible to certain businesses and other organizations which generally do not have to be repaid. Grants may be available from a number of different resources. For example, government agencies, nonprofit organizations, universities, businesses, and private parties may offer grants for a variety of reasons. You can research different grants online to determine whether your business qualifies for funding.
Investors are people who provide money for your business in exchange for an expectation of being repaid or an ownership interest in your business. Investors typically secure equity in the company, and often have a say in how the business is handled. To find investors, a company will usually need to have a complete business plan prepared that indicates how the business is expected to grow and thrive. Before you get investors, it is advisable to have an attorney review your business plan.
Crowdfunding is a relatively new means of obtaining money for your new business. Crowdfunding is primarily an online function that is done through donors (quasi-investors) who wish to provide money towards your business. Generally, the amount of money that each person or entity provides is relatively small. However, when you are able to secure a large number of supporters you may be able to raise a large sum of money for your business.
Starting a new business can be a daunting experience, especially when you need to focus on so many different aspects of your company at the same time. Before you embark on your new business, be sure to take some time to review the details with a qualified attorney. The experienced lawyers at Udall Shumway are available to assist you in your new endeavor.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice regarding Funding a New Business, or any other litigation matters, please feel free to contact Roger C. Decker at 480.461.5343, log on to udallshumway.com, or contact an attorney in your area. Udall Shumway PLC is located in Mesa, Arizona and is a full service law firm. We assist Individuals, families, businesses, schools and municipalities in Mesa and the Phoenix/East Valley.