Raising Capital for a Start-Up Business

Of primary concern to most individuals who wish to open a business is finding sources of capital. Start-up costs can be prohibitive, especially if the business must begin with, and maintain, a fair amount of inventory, such as a shop or market. Many whose goal is to open a small business lack the assets to fund it on their own. Rather, they raise capital, sometimes in very unique ways. A Boston business formation lawyer can assist in planning strategies for funding a new business.

Debt Financing

Most methods for raising capital fall into two general categories: equity and debt financing. Debt financing entails taking out a business loan, either through a bank or from friends. This may be a good strategy if the owner’s personal indebtedness is minimal and he can document a good credit history. However, one needs to take care in pursuing a loan. Most new businesses do not enjoy a profit for several years, and just the interest on debt will drive down the potential and increase the time it takes to achieve a profit.

Boston business formation lawyer

Equity Financing

If debt financing does not appear to be the optimal method for raising capital for the start-up, a Boston business formation lawyer may recommend equity financing. In essence, this involves the selling of ownership interest to investors in exchange for capital. Provided the business plan is solid and the concept has a clear potential for profit, investors will likely be pleased to oblige. The downside is that a degree of operational control is thereby lost.

For Further Information

If you would like further information, or need assistance in developing a strategy for raising capital for a new business, give a call to an experienced Boston business formation lawyer at Ionson Law at (781) 674-2562.

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