Sources of Business Funding: Top 10. The most used sources of funding are: Debentures, stocks and debentures (commonly known as “stock” or “securities”). Other sources of business finance: Other sources of business finance for small business / startups: Other Sources of Business Funding: Start Up Capital.
Debentures are common sources of business finance for many different types of businesses. Debenture-backed securities (SBS), which include company debentures and debt instruments such as commercial bridge and loan notes, are assets that give a borrower security in the underlying assets. These assets are converted into cash when the underlying assets are sold by the borrower. Other common debentures are corporate bonds, commercial mortgage backed securities (CMBS), government funds such as Federal Employee Retired Retirement Annuities (” Celebrex”), commercial note backed securities (” Notes on Exchange Traded Funds (“NECF”) and municipal securities.
Small Business Lenders: There are many sources of business finance that are directly from the small business lenders. A list of small business lenders can be researched at the Small Business Administration website. Some of the sources of financing available from small business lenders include: SBA loans, Venture Capital, Commercial Mortgage, Term Loans from Banks/Building Corporations, Consumer, and Self-Borrower Credit Card Debt Funding, Accounts Receivable funding, Account Management Interest, CD Cash, Business Development Financing, Account Management Interest, Customer Credit Card Funding, Business Credit Cards, Business Line of Credit Funding, Accounts Receivable funding and unsecured line of credit funding.
Seed Investors: One of the most important sources of business finance is seed financing. Seed investors provide a significant source of long term funding for start-ups. In return, the start-up company promises to pay these seed investors a certain percentage of its future sales or net income. Seed investors typically want to receive a return on their investment within one to three years. Another common sources of small business funding are venture capital firms and individual angel investors. These sources of financing are not often used in start-up businesses because the potential for return is not known until several years after the start-up company has already been established.
Commercial Lending Institutions: One of the most common sources of business finance capital is through commercial lending institutions. The typical commercial lending institution will provide a line of credit based upon the credit value of the business. This line of credit is based upon the equity value of the company and is offered as an unsecured loan. Most lending institutions will require the applicant to have a sufficient amount of capital to qualify for this funding and will require a co-signer.
Franchise Loans and Grants: Another commonly used source of business finance is through franchise financing. A franchisee provides capital upfront in return for certain rights to use the franchisor’s product or service. In return, the franchisee must make return of these rights or face the termination of their franchise. Franchises can also be sold to other franchisees in order to raise additional capital. Private funding can be obtained from a variety of sources, including bank loans and private investors.
Venture Capital: Venture capital is obtained by private investors or venture capitalists through a process called ‘private placement’ or ‘private funding’. This type of capital is usually provided by venture capital firms. Capital from this source is most often used for early-stage, growth companies that have no real track record of profitability. Because of this, venture capital represents one of the best sources of business finance available.
Private Equity: There are a number of sources of venture capital available to startups. However, these sources are not commonly used as startup business loan sources. One of these sources is private equity. Private equity is provided by private equity firms that are not publicly held. This gives these firms a greater power over what loans they take on, which limits their risk. Private equity can also be used as a source of start up business finance, but is not often used as a general funding source.