Frequently Asked Questions about Private Business Funding
As a private business owner, you may have some questions about funding. Today, we’re going to take a closer look at some of the more frequently asked questions, and answers, about private business funding.
Questions About Private Business Funding
How Much Funding Do I Need?
Being that no two businesses are exactly the same, there’s no easy way to answer this question. Some businesses need little-to-no funding, while others need large amounts of capital as well as ongoing funding. Before seeking funding, however, it’s a good idea to calculate your business’s projected revenue and expenses. This will give you a better idea of how much money you need to get your business off the ground.
What are The Most Common Funding Options?
According to data by the United States Census Bureau, personal cash and debt is the single most common option for funding a new business. The Bureau found that roughly one-third of new businesses without employees, and 12% of new businesses with employees, had no startup capital. Instead, they used their own personal cash and/or debt to fund their business.
Will Personal Credit Affect Candidacy for a Business Loan
This is a question many small business owners ask, especially when seeking funding. Some people assume banks and lenders only look at a business’s credit history, but in reality they look at both the business’s and the business owner’s credit.
Can I Get Funding with a Bad Credit?
Absolutely! While the housing/financial market crash has placed tighter restrictions on funding, business owners and entrepreneurs can still obtain funding with little-to-no credit or bad credit. Creating a sound business plan can ease borrowers’ worries, increasing the chance of approval.
What’s the Difference Between Debt Capital and Equity Capital?
Most business funding can be categorized as either debt capital or equity capital. Debt capital is traditional debt-based funding in which a business acquires money under terms that it will repay the funding (typically with interest). Equity funding differs, however, in the sense that the business does not take debt. Instead, the business sells equity (partial ownership) in exchange for funding.
What is Venture Capital?
Venture capital is a form of equity capital in which a venture capital firm offers funding to a startup business in exchange for equity. It’s considered high risk for investors. If the business fails, the venture capital firm may lose money. But if the business succeeds, it can earn far more money than offering a traditional debt-based loan.