If you are not independently wealthy, and perhaps even if you
are, eventually you will probably need to obtain some outside
capital for your business. In some instances, you may need to
obtain capital for the initial expenses prior to opening your
business or, for instance, the funds you require may be for
expansion or working capital during the off season.
Generally, business financing can take two forms: debt or
equity. Debt, of course, means borrowing money. The
loans may come from family, friends, banks, other financial
institutions, or professional investors. Equity relates to
selling an ownership interest in your business. Such a sale
can take many forms such as the admitting of a partner or, if you
are in a corporation, issuing of additional common stock, options
or warrants to investors. It is typically a prudent idea to consult
with your lawyer, as there are many significant legal ramifications
to such a step.
