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All about startup financing

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Many potential small business owners think that if they have a great idea then there will be no problem starting their business. However, the reality is that no matter how good your idea is you will need money to get your small business off the ground and running. This can be both a difficult and overwhelming challenge. One of the most important steps that you will need to be able to do is show potential lenders or investors that your idea can be profitable for the long term. Then you will need to be able to find the money you need for things like:

- Required inventory
- Marketing and advertising
- Physical space
- Legal and insurance costs
It is important to realize that startup financing will require planning, research, and some considerable effort but it can be obtained. Here is all about startup financing-
- Know the answer to certain questions-There are certain questions that you will need to be able to answer for any potential lender or investor. Knowing the answer to these questions ahead of time will increase your chances of obtaining the startup financing that you need. These questions include but are not limited to:
1. Will you need the financing for the short or long term?
2. How long before you can repay the loan or offer investors a return on their investment?
3. What will the money be used for? Will you need it for operating expenses or for capital expenditures that can be turned into assets like real estate or equipment?
4. Do you need the full sum of the money now?
5. What amount of risk are you willing to personally assume? (Keep in mind that most lenders will expect you to take on some of the risk of your new business.)
- Know the two basic types of business financing-There are basically 2 different types of business financing. These types are-
1. Debt financing-This is when any business borrows money and agrees to pay it back within a certain time period. There is usually a set interest rate that is charged on the debt. Keep in mind that you will have to repay the money whether or not your small business succeeds. While bank loans are the most common type of debt financing there are other lending options, as well.
2. Equity financing-When small business owners use this option they offer partial ownership in their business in return for a cash investment. The major advantage to this type of financing is that most of the risk is assumed by the investor. If the small business fails the business owner is not required to repay the investment. However, business finance experts caution that that using equity financing is far more expensive if your business is successful. In addition, as a business owner you will also have to give up a certain amount of control within your business.
- Know the options for financing-While business owners most often consider banks and venture capital firms first when seeking startup financing these can be the most difficult options for obtaining the needed money. There are other options for startup financing that include but are not limited to:
1. Family and friends-Many small business owners approach their family and friends about loaning them money or investing in their small business. Keep in mind that you need to be extremely clear about whether you are looking for a loan or an investment. You don't want to jeopardize any personal relationships over money issues.
2. Credit cards-These can be a viable way to get your small business up and running but keep in mind that it can also be one of the most expensive. You need to carefully consider what credit cards you use and how you use them.
3. Angel investors-These are private individual who are often interested in investing in startup businesses. You will need to carefully research to find those in your area.

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