The Model for Startup Funding
Since it can take up to several years before a new business becomes profitable, its owners typically need to apply for startup funding before launching the business. Unfortunately, it’s much more challenging for today’s new business owners to receive approval for a bank loan that it was for those who launched new companies 10 to 15 years ago. Whether it’s the recession at the end of the last decade, bank consolidations, or simply a tightening of criteria, today’s entrepreneur needs more choices when it comes to startup funding.
An angel investor is typically a wealthy individual who invests in new business at the earliest phases of a startup. In exchange for the financial gift, entrepreneurs give the angel investor equity in the new company. With an average investment timeline of three to five years, most angel investors curtail the relationship with a new business owner once the company’s stocks go public or the owner decides to sell the company.
While this isn’t always the best option due to the high-interest rate of many credit cards, it’s something to consider as a last resort if you can’t access other startup funding. Be sure to buy only the essentials to launch your business to avoid quickly getting yourself into debt. Once your business is better established, it’s a good idea to apply for a separate credit card in its name.
Some other alternatives to consider include borrowing from family and friends, applying for a loan through the Small Business Administration, teaming up with venture capitalists, and applying for alternative financing. Approved Business Lending is happy to help you explore your alternative financing options. Please contact us today.