The greatest challenges an entrepreneur faces throughout the various stages of owning a business are directly related to finding and securing capital. Entrepreneurs can use capital in a variety of ways, including financing hefty startup costs, funding current expenses related to operations and production as well as paying for expansion. Regardless of its use, it is difficult to find and secure capital from outside sources, and it is daunting to understand how different forms of capital raised may affect future business ownership or equity positions. The following are the most common methods for raising capital, although they are not the only methods available to an entrepreneur.
There are a variety of sources available to entrepreneurs that provide for the raise of capital in exchange for partial ownership in the business, generally referred to as equity financing. Most commonly provided by venture capitalists or angel investors, equity financing requires that a business have a high probability of rapid growth as well as a committed, intelligent business management team. These aspects of the business are necessary because the process of obtaining equity financing from these sources is highly competitive and requires a great deal of vetting from the investor. However, an entrepreneur who is successful in raising capital through this method has ample time to
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