Start-up costs are typically the greatest barrier to starting a new business. There are two ways to pay for your start-up: debt and equity. In either case, you will need a solid business plan to secure credit or to attract investors.
Debt refers to any form of borrowing, including a bank loan or loans from family and friends. Since your business is new, you will most likely have to guarantee the loan yourself, which means you will be responsible for paying it back if the business is unable to do so. If you need startup money, the Small Business Administration (SBA) is a good place to start looking for financing and information.
Choosing to fund your venture through equity rather than debt would mean selling a stake in your business to a third-party investor in order to raise startup capital. The benefit of raising money through equity is that your investors take on a large part of the risk. In return, they may want a say in how the company is run. If you plan to raise startup capital through equity, we recommend having an attorney draw up a detailed contract outlining the ownership and operation of the company.
