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For young and rising companies in search of business funding, there is no one-size-fits-all option. Venture capital and business loans are two of the most desirable choices, but they are not equally beneficial choices in every situation. There are significant differences between when each is a good fit for a growing firm.

Venture Capital
Seeking out venture capital is best for businesses that are young but also have the potential to become huge both geographically and financially. Venture capitalists will not be interested in companies that do not have that capability. If a business fits those criteria, investments from venture capital is also a good fit when cash flow comes sporadically or is simply in short supply. In this case, a young company probably does not have the working capital to consistently repay a bank business loan and may be willing to sacrifice a little equity in exchange for that lifeblood of cash.

Money from VCs is also a good idea when a company’s brand is not yet established in the market. The financial help from venture capital can translate into credibility with other big market players, including major lenders.

Business Loans
In some situations, taking out a business loan can be much better. For example, bank loans are often easier to come by when a business already has an established market presence and banks can easily recognize their work and success. That does not usually take place right from the start for most firms.

Business loan debt can also be the right solution for a company whose cash flow has stabilized and is consistent. This make regular payments a more realistic option. Again, this typically signifies a business that is a little more seasoned.

A firm may also make better use of a business loan, when they have no desire to give up any more equity. VCs can be very helpful, but in the end, giving up equity means losing some control over direction and scope.

It is important to note also that any growing business may take advantage of both venture capital and business loans at different points along its journey. Each can be equally helpful to the overall financial well-being of the company if used at the appropriate time.


Search for Small Business Loan Sources and receive your matched lender list
AND received FOUR free Business eBooks worth $39.95!
Search for Small Business Loan Sources