There are 3 sources available for funding your business. We’ll not discuss about banks or lending institutions, but the people you can approach personally to have interest in your enterprise.
1. Personal Source, Family, and Friends
Mostly, new business start-ups rely primarily on the personal contributions of the entrepreneur and any support they can receive from family or friends in gathering money. There are two ways of looking at your family or friends support. One is the negative view of asking for help, the other is positive view that you’ll share the profits to those people.
A friend or relative, who senses your enthusiasm and has confidence in your proposal may wish to become part of it. Whatever the case, it should be documented as any business transaction. Any investor should receive a fair devidend on profits. Loose knit arrangement between friends often backfire on all parties.
2. Taking Partners
One way to increase assets is to add the assets of partners. It can add to your cash or collateral value. Partnerships give two heads and also two personal financial statements. Taking a partner is not a decision to be taken lightly as partnerships often ruining relationships if formed for the wrong reason. However, if taking a partner provides the necessary financial support it is certainly worth consideration. If taking a partner is strickly for gaining financial support, you might wish to find a limited partner. A limited partner is an investor with no formal direct voice in the management.
3. Taking Investors
If you need larger capital than the support you can gather from adding a partner, you might wish to add investor through selling slot in your corporation. It can give you cash without debt, since it can be the investment oportunity and explained to groups or interested investor at meeting. The entrepreneur’s responsibility will be to share profit, but not management.