If you are an entrepreneur looking to fund a business or make it grow, raising the necessary capital can be a difficult task. Many chose to start a new company with their own funds and the help of friends and family, and as it grows they turn to outside funding. We have selected 6 types of business funding to help you decide what fits your needs best:

6 Types of Business Funding 6 Types of Business Funding Pictures

1. Savings
Using your personal savings to start a new business will eliminate the interest rate imposed by a bank. However, if you plan to extend an existing enterprise, it would be wiser to use the saving account or get money from inside the business. If you consume all your savings, there will be nothing left in case the business hits a rough patch.

2. Debt financing
Bank loans and credit card loans are the most common form of debt financing and the most popular types of business funding. If you have a well written business plan, a bank can provide you with a loan or a line of credit. This loan usually has an interest rate and a repayment schedule. The service is available to companies that can’t get equity funding, and sometimes it may require personal collateral. A good relationship with the banker can increase your odds.

3. Grants
If you company is eligible for a grant, apply to the Small Business Innovation Research (SBIR) or the Small Business Administrations program. Another way is a Cooperative Research and Development Agreement (CRADA) with a government agency. Although the environment is highly competitive, the benefits are great.

4. Peer-To-Peer Loans
One of the newest types of business funding is the peer-to-peer structure. This system uses the internet to locate potential investors that seek to help a person and earn a return on their capital. You must create a profile on the website, tell about you idea, and if enough lenders are willing to participate the business gets funded.

5. Equity Financing
If you seek funding for an existing company, selling partial ownership to an investor in exchange for money can be a viable solution. The investors assume most of the risk if the company fails, and also make a great return if it succeeds. Because of this, they are also more involved and can offer advice and connections. However, don’t give them too much control over the business.

6. Mezzanine Finance
This type of funding is a combination of equity and debt financing, mainly used to grow an existing business. The mezzanine financing gives the lender the rights to assume ownership or equity interest if the loan is not returned.

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