Choosing The RIght Capital
What Kind of Player Are You?
When considering how best to finance a business, you need to know what your options are. Raising capital through the sale of equity (stock) is the preferred option for young businesses with aggressive, cash-dependent growth potential. Debt financing is normally cheaper and easier to secure than equity financing. Unfortunately, the majority of entrepreneurs don’t understand the formula for accessing these resources.
RapidFireVC focuses on the right path for your company.
Equity Financing
RapidFireVC, like other equity investors, expects little or no return in the early stages, but requires much more extensive reporting on the company’s progress. An equity investment is made with the hope of very high returns far beyond the interest rates in traditional lending.
The majority of early-stage, third-party equity financing comes through Angels investors who tend to keep their money close to home (within 50 miles or so) and invest small amounts ($50,000 to $250,000). Qualified Angels can be difficult to locate because unless they belong to networks or trade associations. RapidFireVC has an extensive network of credible Angels behind its Shared Success™ program who have both the interest and the capacity to invest in properly-positioned opportunities.
CONSIDERATIONS:
- Am I willing to share control and future profits in my business?
- Do I really want investor-partners forever?- How big of a share am I willing to give up?
- Will I be able to keep up with the investor’s reporting requirements?​
- Am I comfortable disclosing company secrets to potential investors?
Keep in mind that traditional investors will want to take a much larger share of a start-up, than they will accept of a company with a two- or three-year track record of success.
Debt Financing
Assuming you’ve established solid business credit, debt financing can offer more flexibility and options than you may realize. A key benefit of RapidFireVC's Shared Success™ Program is access to our network of credit facilities, the approval guidelines for which we are intimately familiar.
Unlike equity, debt financing doesn’t require a “road show”—securing an approval for debt financing is primarily based on how well you match against the bank’s automated scoring model that rarely requires human eyes for approvals on loans below $100,000.
CONSIDERATIONS:
- What kind of debt financing can my company qualify for?
- What are the key factors for approval?- How much debt can my business afford?
- Can I handle the payments if cash flow is off?
- What happens if interest rates rise?- Am I willing to pledge company and/or personal assets?
Remember, debt lending is more analytical than personal. Your ideas aren’t as important as your ratios. It boils down to a simple question: Is your business credit worthy? Are you? Business credit is essential.
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