Types of Small Business Financing
Summary:There are many ways to get startup capital for a new small business. Here are some common types of small business financing for the budding entrepreneur.
When starting a small business, there are several options for finding startup capital. Here are some common types of small business financing, and a brief description of each business financing method:
Business Loans - These are loans given (generally from a bank or financial institution) specifically for the purposes of starting a small business.
Personal Loans - These loans are granted to an individual (generally the small business owner) to use as they please. The entrepreneur then uses the funds as startup capital for their business.
Angel Investors - These investors tend to invest small amounts into small businesses and startups where they see potential for a decent return. They often provide venture capital in smaller amounts than venture capital firms, and with fewer demands and expectations.
Venture Capital Firms - These groups of investors provide larger startup capital to business owners (often $1 million or more), but tend to expect a quicker, and larger, return on their investment.
Friends and Family - Many entrepreneurs start their small businesses by getting loans from friends or family members.
Personal Savings - Some entrepreneurs save their own money and choose to invest it in their startup ideas.
Government Loans and Grants - Many governments offer loan and grant opportunities to entrepreneurs. Loans need to be repaid just as bank loans do. Grants don’t need to be repaid. Grants tend to be available most often for minorities or those with special circumstances in strict programs.
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