Credit markets are tight, and a lot of new businesses are getting creative with financing. Are you having trouble getting the capital you need to start your business? It may be time to forgo the recession-weary banks and look into some less well known options. Here are a few you may not have considered:
Microloans. Websites like Kiva, which allow lenders to pool microloans of as little as $25 for startup opportunities abroad, are relatively well known. But did you know that Kiva also offers microloans to entrepreneurs in the U.S.? There are other micro financing institutions out there, too, like ACCION USA. And smaller banking institutions, like HOPE, offer loans of $2,000 to $25,000 to help small business owners get started.
Angel investors. An angel investor is a wealthy individual who provides capital for a new business. There are some angel investors who provide this capital with no strings attached, but many do so in exchange for ownership equity in your business or convertible debt, which is a type of bond that can be converted into shares of common stock in your company at a pre-determined price. GoBig is a good place to get started with your research into angel investment networks. If you’re a minority entrepreneur, try the Minority Angel Investor Network.
Venture capitalist firms. Venture capital is a type of private equity given to companies in the early stages of growth which investors believe show great potential. Venture capitalists generally offer this capital in the interest of generating a return through the sale or initial public offering of the company (when a company issues common stock or shares to the public for the first time). Much like angel investors, venture capitalist firms are betting on having a stake in your company’s future success. Here are some of the country’s top venture capitalist firms, according to Entrepreneur Magazine.
Franchise. If you want to start a business with a proven track record, franchising may be the right route for you. Many franchisors, like Instant Tax Service, offer financing to qualified candidates. Minority and veteran applicants may also receive special discounts.
Friends and family. This one’s last on the list only because borrowing from friends and family can be tricky. Be sure that if you approach friends and family for funds, the terms of the loan – or gift – are spelled out in writing. Wealthy friends and family may be happy to send you a gift, but – more often – they will want to know when they can receive a return on their investment. Some may also want to charge you a small percentage of interest. Be sure you agree on all the details before accepting any money from friends and family for your business.
Tags: Entrepreneurship, Franchising
This entry was posted on Tuesday, September 1st, 2009 at 12:34 PM and is filed under Tax News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
