Small Business Financing Options

Money is the mother's milk of any startup. Access to capital often determines whether a fledgling enterprise succeeds or dies in infancy. There are several common types of business financing options

Angel Investors and Venture Capital

Angel investors are an excellent source of early-stage financing. They are often willing to tread where there is too much risk for banks and not enough profit potential for venture capitalists. Angels will invest for a longer time-horizon than will other investors — up to five years or more. They may also invest smaller amounts — $1 million or less.

Venture capitalists, by contrast, have stringent investment criteria and generally specialize in specific high-growth industries. Because they want a way to cash out in three to five years, venture capitalists usually shy away from very new businesses, and rarely invest less than $5 million at a time. Accepting a venture capital investment also represents the potential loss of independence for owners, because venture capitalists often take an active role on the company's board and may push a specific strategic agenda.