Finding Growth Capital for Small Businesses
Small business owners who are reluctant to borrow funds or issue equity to obtain growth capital often find that their companies experience stagnation or even failure. Most entrepreneurs eventually find themselves in the position of having to seek financing for their business endeavors. Here are some of the major sources of growth capital for small businesses.
Venture Capital Firms
Venture capital firms are organizations that insist on equity as a condition of their financing of business startups. These firms are generally willing to invest large sums of money in exchange for a having a board representative and a voice in the running of the company. Although this form of growth capital requires you to give up a portion of your share of ownership, if your company fails, you don’t have to repay the investment.
Angel investors differ from venture capital firms in that they are individuals or groups of individuals looking for investment opportunities. They are more prone to place their investments in companies whose missions appeal to them. They frequently have access to potential customers and vendors that can aid in business expansion. Angel investors sometimes offer advice or even desire a place on the board.
Traditional Bank Loans
A major advantage of bank loans as growth capital is that the financial institutions do not require equity, so you retain sole ownership of your business. However, these loans must be paid back regardless of the state of your company cash flow, and struggling startups sometimes have difficulty making the payments during lean times.
Entrepreneurs generally have to be willing to invest their own funds in their small businesses. In fact, outside investors often check whether owners have the confidence to commit their own finances to the company before they agree to supply additional growth capital.
For more advice on obtaining growth capital for small businesses, get in touch with Prime Start Capital.