| By :
Nick Messe
No matter what new venture you have conceived, most business start ups need initial capital for product development, inventory, marketing, facilities, legal expenses, and a host of other expenses. This article explores some of these alternatives. There are many sources of funding for new businesses, each with a level of risk. You could fund your project with savings or a home equity loan. Obviously, if your business fails you will have nothing to fall back on. Small business loans are an option, with the benefit that you are not required to surrender ownership in your company. The qualification process is stringent. Additionally, payback can be a burden for new businesses with limited cash flow. An angel is a business investor that funds start ups that would be too risky for banks to fund. These start ups might not be appetizing for venture capitalists either. Angels are familiar with the industries they finance. As such, they can provide insight and advice. A venture capitalist is a person or group that invests in new businesses. With an interest in the success of a small business, they often bring valuable managerial, financial, and technical expertise that could mean the difference between success and failure. Venture capital firms target high-potential, growth companies in the early stages with an objective of an IPO or acquisition. Targeted industries are those with large up-front capital requirements and high return on investment potential including biotech, medical instruments, computers and technology. When researching venture capital firms and angel investors, it is appropriate to speak personally with the CEO or principal of the firm and to request a portfolio. Do not be shy in requesting the information you need to make a sound business decision. Consider what types of businesses and industries are they financing, and what their return on investment time line is. Find out what their level of involvement is with management as well. After you approach a VC, the firm will investigate the business in extensive detail. Applicants with a sound business plan in a highly profitable industry are more likely to be accepted. Before you can request funding, you need to know how much you are going to need and what your business is worth. The process of business evaluation is challenging, even for experts. You might consider working with a mentor. A mentor can give you an advantage that others may not have. That advantage is a small business consultant. Involve your mentor in all aspects of business from the big picture conception to the details of the daily management. Starting a new business and marketing it is a risky thing to do. The US Small Business Association states the the number one reason for new business failures is poor management. Inadequate funding is a close second. With solid planning, adequate financing and the right advice, your business can be soaring in short order.
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