Financing Options for Small Businesses Private Financing

Most common categories of private financing are banks and microlenders, venture capitalists, angel investors, corporate sponsors, personal credit cards and lines of credit, and SBA loans.

Seed money: The first infusion of capital used to get a business started

$$ Banks

$$ Microlenders: Organizations, often not$-$for$-$profit, that lend smaller amounts of money to business owners who might not qualify for

conventional bank loans

Financing Options for Small Businesses Private Financing

$$ Venture capitalists $($VCs$)$: Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit

$$ Angel investors: Private individuals who invest money in start$-$ups, usually earlier in a business's life and in smaller amounts than VCs are willing to invest or banks are willing to lend

Financing Options for Small Businesses Private Financing

$$ Corporate Sponsors

$$ Credit Cards and Personal Lines of Credit

$$ Small Business Administration Assistance

Financing Options for Small Businesses Public Financing and Crowdfunding

Public Financing :IPO

$$ Initial public offering $($IPO$)$: A corporation's first offering of shares to the public

$$ Crowdfunding: Soliciting project funds, business investment, or business loans from members of the public. Combines elements of public and private financing

Advantages of Franchising

$$ Combines at least some of the freedom of working for yourself with many of the advantages of being part of a larger, established organization

$$ Name recognition, national advertising programs, standardized quality of goods and services, and a proven formula for success

Disadvantages of Franchising

$$ Typically agree to follow the business format

$$ Little control over decisions the franchisor makes that affect the entire system

$$ Don't have the option of independently changing your business in response to market changes

Questions

$1.$ Please compare different financing options regarding their relative benefits and risks.

$2.$ Compare these start$-$up options in terms of their advantages and disadvantages.