Sources for Raising Capital
There are many different sources of capital. Generally, they will fall into two primary categories: (1) debt financing, which means that the entrepreneur or business borrows money and repays it with interest; and (2) equity financing, which means money is invested in the business in exchange for an interest in the ownership. Sources of capital may include: a business owner’s own money/resources (credit cards, home-equity loans, savings, 401(k) loans, etc.); the money/resources of the business owner’s family, friends, key employees, etc; Small Business Administration (SBA) loans, microloans, general small business commercial lending, etc; Angels comprising of wealthy individuals, wealthy families, small investor groups, cashed-out entrepreneurs, etc.; Institutional investors who see hundreds of deals and only make a handful of investments each year. The new business must be in a very hot industry and the owner or entrepreneur will need a proven track record.