Wow. What an amazing vote of
confidence in your company.
A lender is a different creature.
Lenders, such as banks and even the SBA, ask for collateral.
"Collateral" is something of value. It may be the value of
your inventory. It may be the value of your building. It may
be the value of your home, or your life's savings. Then, even after
you get the loan, you will make payments on the interest for as long as
you have the loan.
Because lenders demand collateral, the
loan is much more secure.
WHY INVESTORS FOR STARTUP BUSINESS INVEST
Investors for startup business don't look at collateral.
For the most part, they know they can't possibly get enough to secure
their investment anyway. So, instead of collateral, they ask for an
ownership interest in your company.
They invest because they believe that
your company is going to be worth a whole lot more in a few years.
Then, they can sell their shares and make a goodly profit.
WHICH IS THE BEST OPTION: INVESTORS
FOR STARTUP BUSINESS OR
LENDERS?
This is not an easy answer for most
companies. Getting money of any kind puts a strain on the
company. Lenders demand collateral; investors for startup business often demand a tidy
chunk of your business. Some say that investors for startup business
demand entirely too much.
In reality, the answer may actually be made for
you: It depends on how big and how fast your company can grow.
Investors for startup business are typically only interested
in companies on a fast track to growth and profit. Truthfully, less
than five percent of the companies seeking venture capital investment
actually get it. Very, very few companies meet the stringent
requirements of investors.
Take a look at this chart
outlining the various types of investors/lenders to get an idea of
options for your business. Be sure, too, to check out the Alternative
Financing options that we talk about.
