By Marty Aquino, eHow Money Contributor
20 MAR 11
Choosing the right type of start-up capital is an important step to helping your business survive. Your company may thrive under debt financing, or may generate additional options with private equity. Loans can have lower interest rates than what most private equity firms charge. However, venture capital and private equity may give you the flexibility your company needs to grow. You have plenty of companies to choose from, so be sure to do your research and work with ones that specialize in your industry.
Business loans may be well-suited for your company, if you or your investors have decent credit and have established track records. Traditional financial institutions typically charge lower interest rates as compared to private equity investments, but key issues like repayment schedule and required down payment are usually inflexible. Further, if your company's credit score declines, some banks may reduce your available credit limits --without consulting you first.
Sources for Start-Up Loans
Before you start tracking down sources, make sure your company is thoroughly prepared with a complete business plan and compelling financials. Check out the Lending Club for unsecured loan requests of $1,000 to $25,000. Prosper.com is a crowd-sourced social lending site specializing in funding for start-up companies. For loans coupled with consulting services, try Accommodate Financial Solutions.
Venture Capital and Private Equity Financing
Venture capital and private equity financing can provide many advantages for your start-up company including: nearly 100 percent financing, additional expertise and relevant connections. However, during down economies, valuations of start-up companies may be lower, so be prepared to fiercely justify your funding amount requests. Many venture capitalists must also be convinced that your business idea will generate tens of millions of dollars in revenue. Or, it's likely they'll pass.
Sources for Venture Capital and Private Equity Financing, Read more: Start Up Money for Businesses
Startuploans.org: Increase Your Chance of Getting a Business Loan
Loan.com: 7 Uncommon Sources for Startup Business Loans
More Startups Are Getting Less Venture Capital; Martin Zwilling; OCT 2010