The past couple of years have been tough for modest organizations, to become positive. With the economic downturn, sales have been slower and growth has been halted in a lot of industries. Additional, the credit crisis of 2007-2008 has created financing a organization even harder. Fortunately, the years ahead look promising for little company financing. Beneath are the top methods to secure financing for a smaller business enterprise:
Angel Investing & Venture Capital
Angel Investing is the process whereby a wealthy individual provides funding to a company in exchange for equity and sometimes debt as well. There are professional Angel Investors, or the could simply be an acquaintance of the entrepreneur. Venture Capital is largely the same process, but on a larger and more sophisticated scale. Usually, venture capital firms create “funds” from investors that they use to invest in young companies or startups. While Silicon Valley is notorious for getting the lion’s share of venture capital, there are also numerous VC firms and individual Angel Investors that work in industries other than technology and are based outside of Silicon Valley. To get a new and unproven organization, it’s virtually impossible to secure bank financing (see under) and venture capital or angel investing will be the idea choice for a young startup.
Bank LoansAs mentioned, bank lending was been tough on organizations during the credit crisis, and it’s still very difficult to find easy credit available in the financial markets. However, for companies in strong financial positions, with plenty of assets, lending is starting to gain momentum once again. The Tiny Business enterprise Administration, see beneath, can make a major impact in the availability of credit for little businesses.
SBA Loan ProgramsThe Smaller Enterprise Administration doesn’t directly make loans, but they guarantee bank loans for qualifying enterprises. This has a number of benefits. The added security to the lender makes the terms and interest rates much more favorable for the organization. In 2012 and beyond, SBA Loan Programs should see strong activity.
These would be the primary formats of securing financing for a small business enterprise, but there are numerous others (including combinations of the above), and all available options should be considered by the organization or entrepreneur before making a final decision on how to finance the business. Typically the most beneficial financing choices are as follows: Angel investing (for any brand new idea), venture capital (to get a growing startup), SBA loans (for young but thriving firms) and traditional bank loans (for the mature and growing company).
