Entrepreneurship Funding: A Comparative Analysis of the Advantages and Disadvantages of Each Funding Option

1411 Words Feb 5th, 2018 6 Pages
There are great risks associated with going into business on your own, but the payoffs can be extremely rewarding as well. What is most important on the path to entrepreneurship is the various sources of funding available. The purpose of this essay is to discuss the various funding sources that are available to entrepreneurs as they seek their project into materialization. This essay will examine several areas of funding and compare and contrast the advantages and disadvantages of each option. These options include: venture capitalists, personal bank loans, small business administration loans and other special types of loans as well.
Venture Capital
One of the first options an entrepreneur should investigate is venture capitalism or venture capitalists (VC) as a means to fund the project of their dreams. Steier & Greenwood (1995) expressed that " Venture capitalists represent an outside source of finance that generally takes an active interest in managing the firm. Two common practices within the venture capital industry are co-investing and staged financing." These two approaches dictate what routes are available for the one seeking the much needed help in starting the business. These investors are interested in industries with high-growth potential, such as information technology. Normally, venture capital investors provide funds to a…