Loans from commercial banks are likely to be insufficient or altogether unavailable to a new company. Thus, entrepreneurs often find themselves seeking funding from alternative sources. Sources of Funds Start-up companies have several options when seeking funding. Each potential source of funding will have advantages and disadvantages. Family and friends are a common source of angel investors.
Private investment is often a relatively quick and inexpensive source of capital.
It may be a good choice for the entrepreneur wishing to retain control of the business with little input from the investors. They will infrequently require board representation or approval of key employees. They usually require only the right to veto major business changes, restrictions on top management salaries, and limits on the amount of stock available for stock option plans. They also do not demand as much equity as do venture capitalists, so there is less stock dilution. Private investors usually receive preferred stock.