Startup financing turns entrepreneurial ideas into real business.
From an innovative business idea to supporting a child’s entrepreneurial spirit, startup financing is necessary to turn dreams into realities. Traditional banks may consider starting a business too risky, and there’s a lot of competition for venture capital. So you may need to rely on alternative funding.
There are several alternatives to consider. These include a margin* loan or a securities based line of credit (SBLC)*, both of which are collateralized by securities in your brokerage accounts. More important, these borrowing solutions allow your financial plan to keep working as you and your advisor intended. Here’s a look at some options.
Benefits: No setup fees; won’t disrupt your portfolio
Considerations: May not be suitable for all; requires a minimum withdrawal amount
Family and Friends
Document your agreement and note perks or equity your investors are entitled to.
Benefits: Convenient and available quickly; simplified contract
Considerations: Potential conflict if business fails and money lost; added pressure; funds may be limited
Affluent people who provide capital in exchange for equity.
Benefits: Substantial funding may be available; access to business coaching and insight
Considerations: May be hard to find depending on your specific business interest; managing divergent interests for the business may be challenging; more contractual strings
Some business grants are available through state and local programs, nonprofit organizations and other groups. Such grants may require you to match funds or combine the grant with other forms of financing, such as a loan.
Benefits: Access to capital at low cost
Considerations: Use of funds strictly defined and limited to certain kinds of business ventures
Put down on paper your ideas for a new business and begin to work on your business plan. Discuss with your advisor how to best finance your business idea and how a business will impact your financial plan. Additionally, consult with your lawyer and tax professional and keep them apprised of your intentions and progress.