Effective Fundraising Strategies For California Business Clients Since 1979
Starting a new business is both exciting and challenging, and that is when your business already has capital. But what if you don’t have adequate funding to get your business idea off the ground? There are a few considerations you should think about before raising money for your startup business.
The least complicated way to fund a business is to self-fund, but if that is not an option, here are a couple of alternatives.
- Small business loan: Though this option is not available to many, some banking institutions are still lending money to small businesses.
- Active investor: An investor that actively participates in the management of the business. In exchange for an equity percentage, you could bring on an investor to fund the business who will actively participate in the business. Active participation by an investor reduces the risk of all the investors involved.
- Passive investors: Raising money from investors who are not involved in the management of the business is the most complicated way to raise money. When raising money in exchange for equity, when the investor is not involved in the business, the equity is considered a security. The Securities and Exchange Commission (SEC) and securities laws regulate the buying and selling of securities. To protect yourself, you often need a private place memorandum or executive summary, along with disclosures, exemptions filings with both the state and the federal government.
- Private loans: It is important to keep in mind that private loans can be considered securities, as above if they are being taken for purposes similar to investing.
It is important to consult with a securities attorney prior to forming your business entity in which you will be raising money.
As part of the process in forming your business entity, The Karlin Law Firm LLP can help guide you in selecting the appropriate securities firm to answer all your questions regarding the raising of money for your business.
Offering Sound Advice On How To Raise Money To Start A Business
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