Alternate Investing
Chapter 1: Types of Alternate Funding
Debt Options for Startups
As your company grows and the equity becomes worth more, there comes a time to switch over to debt funding. There are several forms of debt to consider. Each one is used for a different application.
The primary options are as follows:
- Traditional Bank Loan: This requires a personal guarantee and is most often used to launch a company.
- Line of Credit: Once you have revenue, this can be used to smooth out the uneven bumps in your cash flow.
- Equipment Financing: If you need equipment for your business, this is a good way to finance as it reduces your fundraise requirements.
- Revenue-Based Funding: Once you have a steady flow of revenue, you can use revenue-based funding to accelerate the growth as you pay back out of the revenue stream.
- Factoring/Accounts Receivable Funding: Once you have a steady book of business, you can borrow against the accounts receivable line.
- Venture Debt: Once you have substantial revenue, you can raise debt funding rather than equity funding as it will be cheaper in the long run.
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