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what are the primary sources of funding for entrepreneurs

What are the Primary Sources of Funding for Entrepreneurs?

One of the biggest challenges faced by entrepreneurs looking to start their own business is funding. There’s an old saying that you have to spend money to make money. Without capital, an entrepreneur won’t be able to buy inventory, cover payroll or the many other expenses associated with launching a business’s operations. So, what are the primary sources of funding for entrepreneurs? Let’s take a closer look.

What are the Primary Sources of Funding for Entrepreneurs?

Personal Savings

Surprisingly, most entrepreneurs fund their business using their own personal savings. According to American Express, this is the single most common source of capital for entrepreneurs. Most entrepreneurs wait until they have at least some money saved in their personal bank account before starting a business. Personal savings, however, isn’t always enough to cover 100% of an entrepreneur’s expenses. Therefore, it’s often used in conjunction with other funding sources.

Angel Investing

Angel investing has become a popular method of funding among entrepreneurs. According to Statistic Brain, more than 73,000 U.S. companies received an angel investment in 2014. With angel investing, an angel provides large sums of money to an entrepreneur so that he or she can start their own business. The angel may provide this funding in exchange for stock shares of the entrepreneur’s business, or they may require the entrepreneur to pay back the funding with interest.

Venture Capital

Venture capital is another common way in which entrepreneurs fund their business. In many ways, venture capital is the same as angel investing. They both involve funding from a private investor or investment firm. The difference, however, is that angels typically invest more money than venture capitalists, and angels invest in early-stage businesses.

Bank Loans

Although they can be difficult to secure, bank loans remain a time-tested funding option for entrepreneurs. If an entrepreneur has good credit, they may be eligible for a small business loan. Loans governed by the Small Business Administration (SBA) do not have a minimum amount, but they do have a maximum amount of $5 million.

Crowdfunding

While not as popular as the other methods listed here, crowdfunding is still a viable funding option used by entrepreneurs. As explained by the U.S. SBA, this involves seeking an investment from a large pool of collectors, typically over the internet. It’s called “crowdfunding” because the investments come from a large “crowd” of people. In comparison, angel investments come from a single investor or investment firm.

This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • April 20, 2018


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