I n the following pages we will explain ways of raising money for your small business, and take you, step by step, through the often intimidating business of applying for a loan. It is usual for new entrepreneurs to put some of their own money, often from their savings, into their business. Generally you should expect to provide at least 25 to 50 percent of your start-up cost. This is evidence, for yourself and for potential lenders, that you take your business seriously and intend to make it work. Although the person or firm providing the new capital may not be active in daily operations, you will be taking on a partner who probably will expect to have some say in major decisions.
Limited partners contribute capital but normally have no management responsibility.
If you establish a corporation, you can include numerous equity investors in your business. Each investor is a stockholder owning part of the company, in proportion to size of his investment. In a publicly held corporation shares are sold to the general public by an investment banking or stock brokerage firm. Formation of partnerships or corporations should not be undertaken without the advice of a lawyer. A lthough, clearly, a corporation has some advantages in obtaining funds, it is a good idea to remember that corporations are more closely regulated than most other legal entities.