Get Funding for Your Business

The common thread between all successful businesses is availability of adequate funding. Regardless of how innovative a product or service is, without the necessary funding, your dreams of business ownership will never come to fruition. The tricky part can be finding the funding you need to start your business or expand on an existing business. There are a wide variety of approaches to business funding, but all have certain advantages and disadvantages attached that must be considered. Read on for a brief tutorial about the various types of business funding, and learn which option is right for you.

Personal Funds
Personal funds include funds from your savings account, or retirement fund(s) (401K or 403 B).

Advantages
• Low overhead
• Debt free
• Tax-deferred savings

Disadvantages
• High risk if business is not successful
• You may not have enough in personal savings to fund a business

Business owners also commonly acquire bank loans to finance business ventures. Unfortunately, in the current economy, this is sometimes easier said than done. It might also be in your best interest to keep your credit lines clear for other expenses associated with owning a business—expected and unexpected. If financing cannot be received through bank loans, many consider credit cards as a viable alternative. This option comes with high risk in the event that the business does not assume the expected level of success, as repayment of debt may become difficult.

Funding from friends and family is also considered a form of personal finance. When people lend money for the start of a business, or become a co-signer for a loan for commercial property, this could open up the opportunity for the individual to become a vested owner in your business—a positive or negative, depending your end goal. If the friend or family member becomes a vested owner, this would alleviate the need to repay the loan, but would also limit your overall control of the company.

For many, funding a business with any form of personal financing is not a viable option, as the risk is much too high. So what is the alternative?

Equity funding, also known as equity finance, equity loans, private equity, venture capital or private venture capital, is essentially an investment that combines a life insurance policy and mutual fund shares. With this option, the investor is shielded by the protection of the insurance policy (collateral), and also has added bonus of the growth potential of the mutual fund.