James Kim’s latest article is titled “Money, Money, Money for Your Small Business”.  [James Kim’s Article]

James Kim’s latest article:

Money, Money, Money for Your Small Business

Good news! Investors are more willing than they’ve ever been to give money to entrepreneurs because of the current huge success of small businesses (which created 64% of the net new jobs in the last 15 years, as reported by the U.S. Small Business Administration). Here are some of the best and most common business solutions and financial resources for your new business.

Let’s start from the bottom up: in the beginning it’s a good idea to look to the people you are the most comfortable with – your friends and family. If you’re not looking for huge amounts of money, it just makes sense to go to them rather than the large banks that would likely saddle you with a higher interest rate than those close to you would. That said, make sure you create some type of informal contract with whoever loans you money so that, after everything is over, they’re still your friend because you were able to avoid any bickering over the terms of your agreement.

Friends and family out of the question? Well, if you’re uneasy about giving away any equity in your business, you can use debt financing. Debt financing is just going to a bank for a loan at a fixed interest rate. In order to see if they’ll give you a loan, it’s likely that banks will check your previous relationship with other financial institutions and they might also look into any previous entrepreneurial experience that you might have.

Another way to look for money is through angel investors. Angel investors are on the rise, with 22 percent more entering the business in the past year according to data from the National Venture Capital association. An angel investor is just a single person who will give you money in exchange for either convertible debt or equity in your company and is a compromise between getting more money and support and having to cede some control.

The final option is the most serious: venture capital. Venture capital is money that a company will give in exchange for equity in your business. According to CB Insights, “venture capital investments rose 19 percent, to $21.8 billion in 2010 — the first annual increase since the downturn,” meaning that venture capital is perhaps the most efficient way to get a large sum of money for your business now. Because venture capital is usually in the area of $500,000 to $1 million, you have to be serious about your business to get it: you’ll need a structured business plan and have to be willing to give up part of your ownership in your business and accept that you’ll have a less control than you would otherwise.

When you’re choosing between all of these options, remember to seriously think about where your company is. Do you really need a lot of money right now? Are you willing to give up any equity in your business? By figuring out where you are and what you really need, you can be sure that you’ll get the absolute best deal for what you need for your small business.

James Kim is a writer for Choosewhat.com. ChooseWhat is a company that provides product reviews and test data for business services and products.  Their goal is to help small companies make informed buying decisions on business solutions that help their business.

** IMNewsWatch would like to thank James Kim for submitting this article.

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