29 Apr Top Problems Businesses Face and their Solutions #1: Capital
What do the richest people in Australia have in common? They are mostly, if not all, into business. Not just any business, but successful business. Those that kept growing and get passed down to their heirs, generation after generation. No doubt that every entrepreneur who dreams of making it big wants the same kind of success. But before jumping over that bridge, one has to start the enterprise first. And to start it, one has to have capital.
Sources of Business Capital
There are a couple of ways to get capital to start a business. Bank loans, government grants, personal savings, or money borrowed from family or friends can provide funding for small to medium enterprises. But not all businesses can benefit from a small capital. That’s why there are two more avenues in gaining business capital: angel investments and venture capital.
Imagine a businessman so rich that he thought of helping other businessmen become rich by financing them using his own money. Definitely a heaven-sent person—an angel. That’s where the term angel investment came from. These people may have a particular industry they are interested in and so they choose to support other entrepreneurs along that line. They are willing to share their passion and experience in that industry to break out a company with potential.
Since they are individual investors, their qualification and payment terms may not be as strict and limited as compared to banks or government programs. If one is willing to relinquish some control over the business ones it proved to be profitable, then angel investments could be the best option for a capital. These investors usually require ownership equity as their return of investment.
Mark Shields was known to say that there is always strength in numbers. Venture capital proves him correct. This type of capital pools together investments from large corporations, investment companies, or even pension funds and offers it to their chosen enterprise. Compared to angel investment, venture capital can provide greater support which can mean millions of dollars. It all depends if the business proves to be the next billion-dollar deal.
Venture capitalists usually go in after the business starts, as opposed to angel investors who take risks in providing the seed money from the get-go. They are the ones with the ability to push considerable business growth by providing sales, marketing, infrastructure, or product development support. Aside from expertise in their specific field of interest, being financed by a credible group can give the business an accelerated credibility in the market, not just locally but internationally as well.
Tips in Choosing the Right Source of Capital
As with all money matters in business, caution is the key in choosing which capital program to apply for. Ensure that the individual or group investing in the business is legitimate and has exemplary reputation. Keep in mind future plans and goals when choosing how much capital to acquire. Gathering as much information and knowing the legal terms will be helpful in choosing which investors to trust. And as always, availing knowledge and skills of professionals are vital to each business’ success.