Venture capital should always be a last resort when all other options of securing funding have failed. In most instances the investors of venture capital will give you a minimum of three years and a maximum of seven years for that growth to occur and be profitable. Keep in mind that your information also has to show that these additional earnings will be evident in the allotted time frame. You are going to have to be able to present information that shows there is a very high chance that your business will be quite profitable if you are allowed to access the funds necessary for your business to expand. However, it is important to realize that venture capital may not be a good option for your particular business and financial needs. Some common items that may be involved are software programs for operating computers in the business and research that is necessary for the business to successfully grow. Since the lender can't use them as collateral they find the venture to be just too high of a risk. There are also times when a business needs funding in order to purchase items that aren't tangible. It could be due to the business being new, the business owes too much money to other lenders, or they have a poor credit history that traditional lenders can't accept. However, this 2% is to cover their risk on such an investment.īusiness owners may have no choice but to look into venture capital options if they are considered to be too high of a risk for a traditional lender to offer them the funding they need. In addition you will still be paying the principal balance and the interest on it. They often ask for 2% of the profits during the time it takes to repay the funds as well so venture capital lending can be very profitable. The lender offers the necessary cash and in return they receive shares of ownership in the business. This is a type of loan that comes from a private investor rather than a traditional lending institution. Many business owners turn to venture capital in order to finance the such ventures for their business.
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