Alternative Financing

Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about Venture Capitalism and other Entrepreneur topics.

What are Alternatives to Venture Capitalists?

Alternative Financing

Not sure that venture capital is the right choice for your business' financing needs? Here are some alternatives that can help you get the cash you need to grow your business.

Friends and Family: Why not start with the people who know and love you best? If you have close contacts with cash, consider asking them to invest in your company, either loaning you the money to be repaid, or in exchange for equity in the company. It should be an easy sell! The downside of having loved ones invest in your business is that you run the risk of your business failing and not being able to repay them. That can wreck a personal relationship.

Bank Loans: Probably the most traditional form of commercial finance, a bank loan can provide you the money you need, and you won't have to give up any control of your company to get it. However, the application process is strict for bank loans, and your business may not qualify. You have to pay interest on the loan, which can eat into your profit.

Angel Investors: Angel investors serve two purposes: they get you the money you need and serve as mentors. Many angels are retired successful business people looking for smart investments to “entertain” them in retirement.

The great thing about angels is that you don't have to repay them monthly. They take their cut when you achieve your exit strategy. The downside is that angels are hard to find, and often require you keep them updated constantly on what's going on with the business, which can be time consuming. They also take equity in your company.



Nobody has commented on this tip yet. Be the first.


URL: (optional)


Not finding the advice and tips you need on this Entrepreneur Tip Site? Request a Tip Now!

Guru Spotlight
Carma Spence-Pothitt