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Startup Financing: What You Need to Know

QUICK SUMMARY

You have a vision and framework for starting a business. Does your business plan include the financing for your launch? And enough to keep the doors open until revenues are more reliable? Entrepreneurs have a wide choice of financing options. It’s important to choose what’s best for your business—and avoid taking on too much risk.

Find the Right Mix of Debt vs Equity Financing

Equity is money or assets you or someone else put into the business in return for an ownership stake. Debt is what you borrow—in other words, a business loan.
 

Sources of equity financing:

  • Using your own savings
  • Selling shares to family members and friends
  • Angel investors
  • Crowdsource equity

Sources of debt financing:

  • Bank loans, including home equity loans
  • Credit cards
  • Borrowing against insurance policies, retirement funds and other personal equity
  • Loans from family members or friends
  • Crowdsource loans
  • Loans through the U.S. Small Business Administration
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Use Financing from Family & Friends to Launch Your Business?

Family and friends are often a small business start-up’s go-to choice for a start-up loan or equity stake.

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Downsides to Borrowing from Your 401(k) to Fund Your Business

One source of emergency or short-term funding might be a loan from your 401(k) retirement plan or that of your spouse.

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