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Start-up Business Funding

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In an earlier post, we talked about two types of financing available when starting a small business: debt and equity. But there are other funding sources available. Mark Hogan, president of Small Business Banking at Bank of America, breaks the sources of funding into three categories:

1- Personal Capital: This includes personal savings, friends, family and relatives willing to invest in your company. This is sometimes called “love money” as it can be hard attracting external investors, whereas people you know are more likely to share your confidence and give you a shot.

2- Consumer Credit: This includes credit cards, home equity loans as well as mortgages. In fact, it consists of using a consumer financial product to fund a business.

3- Business Credit: This includes a loan in the name of the business, most likely backed by a personal endorsement, as well as a business card, which acts most like a consumer credit card, only it is in the name of the business.

Eventually, as the company grows, the last category might also include a business line of credit or a business loan.