Unfortunately, funding and investment involve money, and money breeds predatory business practises, scams, and other such things. So, to help you avoid the pitfalls, here are some startup loans business reminders.
- Be wary of who you seek funding from
Don’t consider private placement, friends, and family to be good sources of investment capital simply because they are mentioned here or are taken seriously in another source of information. Some investors are good sources of capital, while others are not. These less established investment sources should be approached with extreme caution.
- Make a written record of it
Never spend someone else’s money without first doing the proper legal work. Make sure the paperwork for startup loans business is completed by professionals and signed.
- Do not spend until you have received funding.
Never spend money that was promised but was never delivered. Companies frequently receive investment commitments and contract for expenses, only to have the investment fall through.
- When you’re in a bind, don’t turn to friends and family for help
Be aware that seeking investment for working capital loans from friends and family is not always a good idea. When your business is in trouble, the last thing you want is for friends and family to abandon you. You run the risk of losing friends, family, and your business all at once.
- Financing is difficult
As they begin, most businesses are funded by home equity or savings—this is known as bootstrapping. Only a few high-growth startups can secure outside funding. Venture capital transactions are extremely rare. Borrowing will always be contingent on collateral and guarantees, rather than business plans or ideas. And, while business borrowing is common for established businesses, it is not a common option for startups.
What steps you should take next are highly dependent on your specific business. In general, high-tech startups should look into angel investment or friends and family first, whereas steady ongoing businesses should ask their small business banker. But keep in mind that your company is unique.
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