question.jpgIn Business Law

How can I finance my new business?

Obviously, one of the biggest issues in starting a new business is putting together the money to get things off the ground and running it until the company becomes profitable on its own. For a small business, you may be able to fund it on yourself, using your savings, taking out an equity mortgage on your home or even using your credit cards (while this is fine for short-term financing, you should not use your credit cards over the long term because of their high interest rates). Outside of such self-financing, the two major ways you can finance a new business are by taking out loans, or obtaining equity investors.

Most business typically take out loans from a bank or other financial credit institute, although you can certainly arrange for a private loan from friends or family. Similarly, with equity investors, you can arrange for friends or family to become investors in your business venture or you can find unaffiliated investors to provide you with startup money and/or services. A major advantage to taking the loan route is that, over the long term, if your business does well, once the loans are repaid you get to keep all of the business profits and do not have to share them. With investors, you would always have to share your business profits, as those investors have essentially purchased a portion of the business and become co-owners.

Before you start down the path to getting financing for your new business, you should also consider putting together a business plan, which will help in getting a loan approved or convincing investors to join you.