Your credit cards can also help hind startup business expenses and purchase equipment and supplies. The price one pays for easy access to credit can he relatively high interest rates, often exceeding twice those our a business loan secured through a bank.
Using Funds from Others There are several sources of outside funds. These can he generally divided into equity investors, who actually become part owners of the business, and
lenders, who Provide money for a limited time at a fixed rate of interest. Both run the risk of losing their money if the business fails, but this gamble is offset for investors by the possibility of large returns if the business is successful. because the rate of return for lenders is fixed. some security is usually given to offset their risk.
You may be able to find investors interested in a venture opportunity. Such people
might he found among relatives, friends, attorneys, bankers, or securities dealers. Building
multiple hank relationships early on in your business is important. hut you must have a well-prepared business plan and an advocate in the bank on your side.
Special types of investors—venture capitalists—capitalize a business startup in return for partial ownership. They seek high—risk businesses that show the potential for high profit. The flip side of the coin for high risk is, of course, a greater likelihood of a loss. A venture capitalist
may have plans to publicly sell shares of stock of the successful venture, if your home—based