Funding a Business
Businesses are financed in a variety of ways. Below we highlight a number of common ways people fund their startup with some definitions.
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Angel Investors
An angel investor (also known as a private investor, seed investor or angel funder) is a high net worth individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.
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Commercial Lenders
Financial institutions, such as banks and credit unions, make loans to businesses.
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Crowdfunding
Small amounts of capital from a large number of individuals to start or grow a business.
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Friends and Family
A very common source of debt financing for start-ups is family and friends.
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Local, state and federal business grants
Government agencies do not generally fund small businesses with grants. Some specialized federal grants may be searched in grants.gov.
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Community development corporations
Nonprofit organizations focused on revitalizing neighborhoods, typically low-income, underserved.
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Microlending
Small loans to low-income groups or individuals who may not qualify for credit from traditional lenders.
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Small Business Administration approved lenders
Small Business Administration (SBA) has a quick and easy tool to connect small business owners to approved SBA lenders.
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Venture Capital investors
Venture capital is financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks and any other financial institutions. However, it does not always take a monetary form; it can also be provided in the form of technical or managerial expertise.
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