Finding affordable financing for a start-up can be a challenge for small business owners. Banks are wary of loaning money to a business without a two-year track record, and raising funds from friends and family has an inherent limit. A venture capitalist, however, can provide a company with the capital necessary for start-up costs and other expenses associated with expansion projects. An individual or firm acting as a venture capitalist has the funds for investing in a new business and the financing acumen readily available to help companies in their infancy, but disadvantages run rampant. Although venture capital is a viable source of equity financing, business owners should be aware of the caveats that exist with this type of funding.
- Forced Management Changes
- Loss of Equity Stake
- Decision-making Ability
- Delays in Funding
