Starting a business usually requires a lot of capital. The amount of capital needed may differ from one business to the next. Entrepreneurs usually have to use their resources to start a business. This includes their savings, personal computers, garage, household furniture, and the like to set up shop. With time, however, the startup will require more funding to grow. Fortunately, there are many private equity funding sources. They include:
- Venture Capital (VC)
If you require funds to take your business to the next level, one of the easiest private equity funding sources you can consider is venture capital. Venture capitalists can be fund managers who want to grow their portfolio fast by injecting capital into viable startups and acquiring a stake in the company in return. VCs usually try to squeeze entrepreneurs by demanding a large stake for a small amount of money. They are also strict on the minimum returns they expect from their investment. When negotiating with a VC, be sure to take time to look at the terms and conditions of the contract before you can put pen to paper. You should be careful not to surrender a controlling stake in your company to the VC.
- Angel Investors
Unlike VCs who use other people’s money to fund businesses, angel investors use their own money. These are usually high-net-worth individuals who have excelled in business and want to give back to the community. They can offer a lot of money without demanding an unreasonable stake in the company. Their ROI requirements are also much friendlier than those of VCs.
- Family & Friends
The people who care about you can fund your business because they want you to succeed. However, they also expect to get a decent return on their investment. While most family members may not demand a written agreement, it is usually a good idea to have everything on paper when someone lends you their money. People usually invest with the hope of recouping their investment in the future. They also expect to receive dividend payments annually when the business starts generating a profit.
- Personal Loans
Entrepreneurs who have a day job can take out a personal loan and inject the money into their business. Personal loans usually come with extended repayment periods and low-interest rates. This startup capital can be recouped in the future by selling shares to third parties.
It is important to note that private equity is treated as a liability in company accounts. After all, these are monies owed to private individuals and entities and must be repaid in the future. Interest and dividends must also be paid on these investments. After selling a business, the liabilities must be sorted out before the proceeds can be distributed proportionately to the individuals who invested in the company.
What You Need to Know About MergersCorp M&A International
Finding the right buyer for your business is not easy. That is why it’s recommended you work with MergersCorp M&A International, a company that specializes in helping business owners find buyers for their businesses. MergersCorp M&A International has a team of competent professionals who can help you analyze offers, deal with the paperwork and help you close the deal quickly to ensure you recover funds to sort out all the liabilities in your business.