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Alternative Bullets

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Pros and Cons of Financing Alternatives

Funding Source Pluses and Minuses

– Friends and relatives Usually the cheapest of all capital sources but greater risk of alienating people if venture fails.

– Business angels More expensive than bank loans, plus chance of investor interference.

– Bank loans Cheaper than capital from professional investors but collateral and immediate payments required.

– Credit cards More expensive than conventional bank loans and fast repayment required.

– Corporate partners Cheaper than venture capital and professional investors but more expensive than bank loans and long-term commitment from partners often lacking.

– IPO Typically among the cheapest sources of capital compared with venture funds, but opens the company up to more investor scrutiny and requires company valuation of $5 million or more.

Source: Investment bankers and venture capitalists

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