The first source of business funding that needs to be considered would be to secure venture capital from an investor or group of investors. The primary advantage of doing so is that they can provide the business with a substantial amount of money compared to the other methods. Moreover, they can use their knowledge and expertise to provide advice that will help the company succeed. However, the business owner needs to consider the problem of the investors owning a share of the company’s equity and having considerable influence on its decisions.
The second option is to secure a personal business loan from a bank. In this case, the bank will not own part of the company or be able to influence its decisions. However, the loan is unlikely to be provided unless the individual can convince the institution that the company will succeed and be able to pay back the debt. Moreover, in case of failure, the owner will have to pay back the debt, which is not necessarily true for venture capital.
The third option is crowdfunding, which is becoming increasingly accessible and effective nowadays. It combines the strengths of venture investments with a lack of its weakness of having individuals with extensive influence on the company. On the other hand, securing the funding is not guaranteed unless the project attracts a lot of attention. Additionally, per Adhikary et al. (2018), crowdfunding has a number of risks for both the investors and the entrepreneur, such as regulatory risks and a lack of guidance.
Reference
Adhikary, B. K., Hoda, T., & Kutsuna, K. (2018). Crowdfunding: Lessons from Japan’s approach. Springer.