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Types of Capital
Small Business Lending Salmagundi
Sources of Equity Funding
Advantages/
Disadvantages
Sources of Debt Funding
100
This type of capital supports the small businesses normal short term operations.
What is Working Capital
100
Private for profit organization that raise money from investors to purchase equity position in young businesses they believe have high growth and high profit potential
What is Venture Capital Companies
100
This is the first place to look for Equity and the most Common
What is Personal Savings.
100
While the lender will charge you interest for using the money the lender won't have any say in how you run or manage your business.
What is Advantage of Debt Funding
100
Lenders of first resort for small business owners, They provide 50% of all traditional debt to small businesses.
What are Commercial Banks.
200
This type of capital is used to purchase permanent fixtures of the business including property and equipment.
What is Fixed capital
200
Serves these primary roles: helping to prepare the registration statement, pricing the stock, promoting the issue in a road show, selling the stock through other investment bankers that it develops
What is The Underwriter/Investment Banker (IPO)
200
Entrepreneurs "next" source for lending. Beware inherent dangers that lurk...especially businesses that flop.
What is Friends and Relatives
200
Allows you to use your cash to pay business startup expenses rather than large interest payments
What is an Advantage of Equity Investors
200
Convincing vendors and suppliers to sell goods and services without requiring payment up front. Usually involves terms, i.e. "net 30"
What is Trade Credit.
300
This type of capital helps a business expand or change it's primary direction.
What is Growth capital
300
Lenders that indicate "guaranteed" loans, up front fees, and unsolicited pitches over the web.
What is a Loan Scam
300
Private investors who invest in emerging business start-ups in exchange for equity stakes in the company. They like to invest in local businesses. They "key" is finding them!
What are Angel Investors
300
Investors require a greater share of your profits than interest payments
What is a Disadvantage to Equity Funding
300
Specialty lenders that allow small businesses to borrow money by pledging idle assets including accounts receivable, inventory, or purchase orders as collateral. Ideal for manufacturers, wholesalers, and distributors.
What are asset-based lenders.
400
This is also known as "Risk Capital." This capital does not have to be repaid with interest, but entrepreneur must give up some ownership in business.
What is Equity capital.
400
This organization has several programs designed to help finance both start up and existing small companies that cannot qualify for traditional loans because of their thin asset bases and their high risk of failure.
What is Small Business Administration
400
These lenders seek investments in the $3,000,000 to $10,000,000 range in companies with high-growth and high-profit potential. They Usually take an active role in managing the companies in which they invest and focus their investments in specific industries with which they are familiar
What is Venture Capital
400
Even if you organize your business as a corporation or LLC, almost all commercial lenders will require you, as a small business owner, to personally guarantee the loan or pledge personal assets to cover the loan.
What is a Disadvantage of Debt Funding/Captial
400
A business owner serves as his or her own bank, borrowing against the money accumulated in the invest portion of this. It usually takes 2 years to accumulate enough cash surrender value to justify a loan against it
What is a Life Insurance Company Policy Loan.
500
The type of capital that a business raises by taking out a loan. It is a loan made to a company that is normally repaid at some future date.
What is Debt Capital.
500
This technique, is the most common source of equity funds used to start a small business is the entrepreneur's pool of personal savings.
What is Bootstrapping
500
When a company raises capital by selling shares of its stock to the public for the first time
What is an IPO -- Initial Public Offering
500
Young companies get a boost from capital injections, but also they stand to gain many other benefits, including technical expertise, distribution channels, marketing know-how, and introductions to important customers and suppliers,
What is an advantage of Corporate Venture Capital
500
Selling debt to one or a small number of investors, usually insurance companies or pension funds. It's a hybrid between a conventional loan and a bond.
What is a Private Placement