Knowing the differences between taking out a loan and bringing in an equity investor are essential to choosing which is right for you. As Business Lawyers, we talk to big, medium, and small businesses seeking capital basically have two options—finding business loans or securing equity investments. Determining which is better for your business will depend upon the type of business you own, your credit worthiness, and your willingness to have someone looking over your proverbial shoulder. Business Loans Pros and Cons• You maintain complete ownership of your business and remain the only voice in running it. Equity Investments – Pros and Cons• Investors may be better suited to provide large sums of capital. Banks are leery of lending very large sums because of the risk of default. Venture Capital and Angel InvestmentsMany people hear the term venture capitalists and assume that these investors will be interested in becoming equity investors in their business. However, venture capitalists are like any large investor and are seeking a large return on their investment. Therefore, venture capitalists are uninterested in most small businesses, which generally seek to turn enough of a profit to make a comfortable living for the owner and employees. Unless your business projects huge potential profits (for example, you have a restaurant that you think has potential to be franchised or you have an invention you’re working on and need capital for research and development), forget venture capitalists. Choosing Between Business Loans and Equity InvestmentsUltimately you will have to determine how the advantages and disadvantages of a business loan and equity investment apply to you and your business. If your business plan projects potentially large growth, equity investors may be attractive for their lenient repayment terms, low risk (they won’t sue you unless you defraud them), and business acumen. Free Consultation with a Utah Business LawyerIf you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.
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8833 S. Redwood Road, Suite C West Jordan, Utah 84088 United States Telephone: (801) 676-5506
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ABOUT USSpent a weekend buying and selling toy planes in Suffolk, NY. Spent several years selling wool in Mexico. Enthusiastic about testing the market for pond scum in the government sector. Archives
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