You need to spend money to make money.
Tired as this cliché may be, it does hold a certain truth, particularly when starting a small business. The good news is that, although it does involve some initial investment, launching a new venture or enterprise doesn’t take a lot of money.
Before considering options to fund your business, you first need to consider both the one-time start up expenses and the operating costs you’ll need to keep in mind. These costs represent the initial investment you’ll need to make.
Consider the various ways you can fund your business. These include, but are not limited to
- angel investors
- small business loans
- small business grants
One of these may be all you need, or you may wish to combine funding sources. Alternatively, if you wish to use as little investment capital as necessary to start your business, you may want to consider bootstrapping.
Financing can take the form of either debt financing or equity financing. Each is available from
- bank loans
- credit cards
- private lending
- angel investors
- friends and family
Regardless of whether your business venture succeeds or fails, you must repay all monies borrowed through debt financing within a set timeframe and at a set interest rate.
With equity financing, you sell partial ownership of your company in exchange for cash. Investors carry most or all of the risk in equity financing: if your venture fails, your investors lose their money, making equity financing far less expensive than debt financing. However, if your business succeeds, your investors typically make a far greater return on their investment than on interest rates. This then makes equity financing far more expensive than debt financing.
Still unsure which option is best for your small business? The knowledgeable team at Lift Legal can help you consider each of the options and create a thoughtful plan to set up the capital you need.
Contact us today to learn more.
The information on this blog and website is provided by Lift Legal for educational purposes only. It is intended to give readers a general understanding of the law, not to provide specific legal advice. Information contained in these pages should not be used in place of competent legal advice from a licensed, practising lawyer in Alberta. Furthermore, by using this blog and website, you understand that no lawyer-client relationship exists between you and Lift Legal.