When it comes time to seek financing your startup enterprise, do you know your options?

 

Mathew Georgiou, MediaSpark Inc. This article was sourced from CISCO.

There are several sources of financing, each with unique features, and you’ll want to consider them all when seeking financing to determine which best fits your needs. Financing available to most businesses falls under debt and equity: debt is a loan that you must repay, usually with interest; equity represents a purchase of ownership in a business. Each type has benefits and drawbacks, and not all businesses meet the requirements for each type of financing. The following provides an overview of the primary sources you should consider.

Love Money

Love money is money from family and friends. It could be debt or equity.

Banks and Credit Unions

Banks normally offer debt, with some form of collateral required. Their objective is to gain a reasonable rate of return by financing low risk opportunities.

Angels

Angels are wealthy individuals who invest equity or debt for financial or emotional reasons. Investment criteria and stage will vary depending on the individual.

Venture Capitalists (VCs)

VCs are professional investors who seek out early stage, high growth companies. Their objective is to receive large capital gains from equity investments.

Mutual Funds

Mutual Funds are professional equity investors who seek out various types of companies, but generally those that are stable and in later stages of growth. They primarily invest in public companies over private. Their objectives vary from capital gains to dividend income.

Investment Banks

Act as brokers to connect people looking to invest with companies seeking financing. Investment banks normally only facilitate deals in the several millions of dollars.

Merchant Banks

Similar to investment banks, but often invest their own funds as well.

Strategic Investors

Businesses that may have a strategic interest in the activities of another business (such as a partner or competitor). Objectives vary from direct financial return to strategic business benefits.

Government

Invest for economic development reasons. Usually debt or grant financing.

General Public

Often called retail investors. May invest for financial and/or emotional reasons. Private companies are significantly restricted from pursuing investment directly from the public.