Financing will likely come from you or a few close friends and family. With the growth of your business, you may notice that your financing options have broadened—outside investors may recognize your business as an investment opportunity, or you may be able to borrow money for the business on its own credit.
The two most common ways corporations raise capital are issuing equity, such as shares, and incurring debt, such as borrowing money through a bank loan or loans made to the business by shareholders. Debt investors look for lower, safer returns and regular interest payments, while equity investors are generally willing to accept more risk and the possibility of waiting for a long time before their investment pays out for higher returns. Usually, founders make most of their initial capital contributions as shareholder loans with a comparatively minor amount invested as equity.
It’s recommended that you consult your professional advisors regarding any financial transactions to ensure you’re raising money efficiently and legally. As a new business owner, you’ll want to be aware of the financing options available to you and know the risks associated with each.
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More topics for start-ups to consider
The Necessary First Steps
There are many necessary initial steps to take in order to successfully start or continue operations.
One of the very first steps of starting and running a business is choosing a legal structure for your business.
Shareholders should enter into a shareholders’ agreement in the early stages of starting a business.
Starting a new business comes with many challenges, such as finding a space to operate.