Unless your business has the balance sheet of Apple, eventually, you will probably need access to capital through business financing. Even many large-cap companies routinely seek capital infusions to meet short-term obligations. For small businesses, finding a suitable funding model is vitally important. Take money from the wrong source, and you may lose part of your company or find yourself locked into repayment terms that impair your growth for many years into the future.
KEY TAKEAWAYS
There are a number of ways to find financing for a small business.
Debt financing is usually offered by a financial institution requiring regular monthly payments until the debt is paid off.
Inequity financing, either a firm or an individual makes an investment in your business, meaning you don’t have to pay the money back.
However, the investor now owns a percentage of your business, perhaps even a controlling one.
Mezzanine capital combines elements of debt and equity financing, with the lender usually having an option to convert unpaid debt into ownership in the company.