There are a variety of situations in which a small business may need an influx of cash. Examples of such situations include when: the business is going through a difficult stretch, the business is expanding to a new location, the business is branching out into a new type of good or service or the business is majorly expanding its workforce. Sometimes, a business and its current owners are able to provide such a funding influx on their own. Other times, they may need to turn to outside sources for funding.
When a person thinks of outside funding for a business, what might come straight to mind are loans. While loans can be a helpful funding source in certain circumstances, there are also circumstances in which taking on a large debt load really isn't a workable or acceptable option for a business and its owners.
Thus, it is worth noting that there is an alternate way to get outside funding: funding through equity. This method involves offering an outside party an interest in the company in exchange for funding.
Now, funding through equity can have its challenges. For one, there are a wide range of options for funding through equity, including:
- Taking on a new business partner.
- Getting funding from family.
- Getting funding through friends.
- Reaching out to angel investors.
- Reaching out to venture capital.
- Crowdfunding.
- Cloud funding.
These options vary in their potential benefits, their possible drawbacks and the types of situations they are best suited for. Thus, when looking to use equity to draw in outside funding, it is important for business owners to carefully think about what particular strategy would be best suited for the business and its goals.
Also, when new interest holders are brought into a company, there is always the possibility disputes could arise in the future between the new interest holders and the preexisting business owners. These types of disputes can have the potential to hinder a business significantly. Thus, when bringing on new interest holders in exchange for funding, it can be important for business owners to take proactive steps for preventing potential future disputes. Also, when a person who owns a business ends up in a dispute with another interest-holder in the company, finding the right way to deal with the conflict can be vital. Experienced business law attorneys can provide business owners with assistance with both of these things.