There are several ways to obtain funding for your small business; the most common loans come from: the traditional bank loans, credit unions, private loan companies or capital companies. Through these types of lenders, business loans must be secured. This means using your personal assets as guarantee (collateral). Business loans are very risky because there are fixed monthly payments that don't change, even if your sales go down, besides the application process is very complicated and it takes a long time until funding occurs, that's assuming you even qualify, as the lender will require credit scores of over 750.Banks may also ask that a business have a co-signer or guarantor. This means finding a financial partner or even checking into the various types of small business loans that the government offers as help to small business owners. Minorities and women certainly have a wider selection of companies willing to loan them working capital. The Minority Business Development Agency (MBDA) is part of the U.S. Department of Commerce and is the only federal agency created specifically to foster the establishment and growth of minority-owned businesses in America. This agency helps minorities with the personalized assistance and financial planning to secure the most adequate funding for businesses.
One type of investor that can loan money to a small business is typically called an "Angel Investor." An angel investor is an affluent person or group of people who provides capital for start-up businesses, typically in exchange for ownership equity. An increasing number of angel investors commonly organize into what's called "angel groups" to share research and pool their investment capital.
Venture capital is the type of private capital usually provided by professional, investors to new and growth businesses. These types of investments are generally made as cash in exchange for shares in the funded company. A venture capitalist professional is the person who makes such investments. Mostly, venture capital comes from a group of wealthy investors, private investment banks and other financial institutions. This form of achieving funding is most popular among new ventures, with limited operating history; these ventures may not be able to raise the needed funds through a debt issue. The most obvious downside for entrepreneurs is that the funding company usually gets a say in company decisions, of course in addition to the portion of the equity.
Another increasingly popular way to achieve business funding is trough unsecured loans. These types of loans don't require you to risk any of your personal assets as collateral. These types of loans are a great option for small business owners how may need funding fast, and at the same time don't want to get into complicated application processes. The most common type of unsecured loan is the business cash advance; this means that the lender will fund a small business in exchange of a small percentage of their future credit card sales until the agreed payback is completed. Because of this, there are no fixed monthly payments, as it goes with the flow of your business.
About the Author:
David Castro often writes articles about
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Date Published :
Jul 21 2008