Starting a new business can seem like a monumental task from the first vision to completion. An area that must be taken seriously is that of how an entrepreneur will finance their operation. Consideration should be given to the type of business, the amount of owner invested capital and the entrepreneur’s history of previous successful ventures as well as failed attempts. This is important if those involve a financial loss, or they have resulted in current debts. A primary question to ask is, what are the various pathways to funding a small business? Once a future business owner is aware of all of their options, they will be in a better position to make a determination as to what method of finance is right for them. Key areas to investigate to enable one to make such decisions include: debt financing, equity financing, minority or majority partners and outside investors. It is imperative for the business owner to have clear and open communication with any key partners who have a vested interest in the financial well-being of the business.
Anyone contemplating an entrepreneurial track should understand the importance and difficulty of raising capital. This concept is perfectly summarized by SCORE members (2007) when they stated, “You may have a great business plan and be a talented workaholic, but finding financing is another matter.” A new business may fill a need or solve a potential customer’s problem, but without the right financing (at the right time) the company providing the product or service may fail before they get started. Each prospective business owner will have their own ideas and risk tolerance that will play a role in what type of financing is right for them. Fortunately, there ar...
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... capital that will sell any portion of their company. Seeking the advice of a mentor or business financial experts would be greatly beneficial for both short term and long term goals to ensure not only the survival of the business but its growth potential.
There should be no doubt that the method of raising equity for a new business will depend on many factors: risk tolerance, type of company, industry, equity needed, availability of owner capital. It is essential for each entrepreneur to take the time necessary in order to explore all avenues of potential finance. This will decrease the risk of incurring unnecessary debt or sacrificing part of a company’s profit due to poor, uninformed decision making. A successful business starts and endures the test of time through researching, planning, questioning and pivoting wherever needed. Raising equity is no different.
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