Business Venture Capital

2 min read • Jul 26, 2011 • Lendio
There are a lot of sources you can explore if you need financing help for your small business. The most common options are borrowing from friends and relatives and applying for small business loan from a bank or a lending firm. Another popular choice for a significant number of borrowers is to get money from business grants from the government and private non-profit institutions. That said, it is very hard to find a grant these days as most organizations are now shifting their structure to provide affordable and easy to get small business loans. Business venture capital is also gaining wide recognition as an alternative funding source for a number of business individuals.

But how does this particular funding work and how can people avail of it?

Business venture capital is basically money lent to you by investors who are willing to take the risks when traditional banks and lenders decline your business loan application because your venture is not a “solid investment”. Also known as “angel investing”, venture capital for business basically works when a group of investors are willing to take risk by purchasing equity or interests in the said company. The scheme is pretty much a risky move on the investors’ end, but done when adequate calculations are taken and the risks are also projected to be able to guarantee high rewards.

SEE ALSO: SBA 7(a) Funding

Angel business capital has been a huge help to businesses that are not yet financially strong to secure a loan from a bank or complete a debt offering. But since the risks are higher, investors charge higher interest rates compared to banks and other lending institutions. Another effect that you might want to look and explore before you enter into an agreement with venture capitalists is that they will also gain control and will have significant part when it comes to decision making. Subsequently, they will also own significant shares in the company.

Aside from providing funds for entrepreneurs, the venture capital industry is also responsible in creating 11% of the total jobs in the private sector in the United States.

The key element in finding the perfect business venture capital partner is to look for a firm that has a track record in investing in the industry that you want to join. If you find that venture capital group and you provide them with an impressive business plan, then you probably have found your partner who will provide you with the money you need. Just remember how the scheme works and you will cruise your way in establishing your business.



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