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Sources of funds: equity expansion financing

If you were starting a business and you planned to invest 75,000 in the business but your financial forecasts indicate that you will need another 650,000 and two banks have turned you down both of them citing the risk involved in small business startups and one of the SBDC consultants suggest to you to consider searching out equity capital and it sounds promising but your questions are how do I find equity investors? where do I start my search? what are my options? which equity sources would you recommend for me? Explain and what are my advantages and disadvantages of using equity capital?

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The first level of financing for new business is often among the so-called "3 F's". They are so-called friends, family and fools. If none of those people are available to you, then inquire among them if they know of an investor. You can also inquire at the banks where you were turned down. Insurance companies or stock brokers are another possible contact to the next level of investor, as discussed in the following paragraphs.

Equity financing for smaller transactions is usually secured from what are called 'angel investors'. Your transaction is probably one in which an angel investor could be interested because true venture capitalists probably wouldn't bother with transaction under $2M. The ...

Solution Summary

The solution discusses a range of sources for equity money for either start-up businesses or expansion of current businesses. It also gives a look at what must be given up for an infusion of venture capital money.

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