How Startup Capital Works
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When you start a business you will need money to get it off the ground. This money is called startup capital and you need it to rent or purchase space for the business, furniture, equipment, supplies, fees and others. There are several places where you can get the startup capital. The startup capital or the working capital is the funding that will help you pay for equipment, rent, supplies, etc, for the first year or so of operation.

You are going to need some funds to keep you going while your business puts itself on its feet. This is why you will need to allocate enough startup capital for the true expenses associated with running your business for the first year of operation. One of the main reasons many new businesses fall is because they do not get enough startup capital, that is to save some money for unexpected events, besides financial needs.

There are two types of startup capital. One is the debt capital, which consists of a loan that must be paid back over a set period of time with interest and other fees. The other startup capital is equity capital, which is funding provided by people to firms who want to own a part of your company and reap some of the rewards when your large and successful company goes public or is acquired by another larger and even more successful company. You also have the choice to use personal funds. Over 50% of small business start-ups are financed with personal funds. You can resort to personal funds if your business does not require producing a product, hiring employees or renting an office.

To deciding to open a business you should also consider getting startup capital from friends and family. In this case make sure you present the business to them just like you would pitch it to a venture capitalist and let them decide whether they want to take the risk or not. Overall, getting startup capital from your friends and family may not be your best choice simply because of the strain it may put on relationships. However, it does work for many people and may even strengthen your relationship if your business takes off and is successful.

You can also get startup capital from banks, although banks are skeptical about lending money to start-ups and prefer to see a couple of years of profitability before they dole out cash. Every bank and every banker will have a slightly different idea of what to look for when deciding whether or not to lend you some startup capital. They will all look at your financial projections and credit history, but their perception of your character is also a very critical factor. It may take many visits to many banks and many different bankers to actually find one that will take a chance on your business and give you the startup capital.

You can also go for startup capital to venture capitalists and angels. With this type of startup capital, you can sometimes obtain large quantities of money, and this money can help businesses with big start-up expenses or businesses that want to grow very quickly. It is pretty difficult to attract angels and VCs but it is worth it.

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