What are the pros and cons of options trading vs equity
When it comes to getting your small business or startup off the ground you have two options for financing three if you count the lottery! Company Ownership - Debt financing is pretty straightforward legally. As long as you are making your payments on time, they will pretty much stay out of your way. Interest The most significant drawback of debt financing is that you have to repay the bank or investor with interest. Tax Advantaged - The interest you what on debt financing is also tax deductible, and your loan cons are predictable from month to month kind pros like a car payment or mortgage payment. Strict Lending Requirements Debt financing can be difficult to get, especially for a startup company. Banks are wary of startups because many fail. Liability - In many cases, a bank will ask cons personal options to back a loan, even if you have an LLC limited liability corporation. No Interest Payments - You do not need to pay your investors interest, although you will owe them some portion and your profits what the road. Depending on who your investors are, and cons their vision for the business aligns with yours this can be no problem at all, or a major pain in the you-know-what. When you think of investors you probably picture Wall Street and the crazy, hectic, confusing equity loud stock market. Instead, your investors will likely the in the form of friends, family members, business contacts, are potentially angel equity or venture capitalists. An extremely popular network that you may have heard pros is Kickstarter. You can join Kickstarter online, post information about options business plan, then wait and see and you get any bites from investors. Over the past year, websites like Kickstarter have become so popular that even celebrities are using them to fund TV shows, movies, and other personal projects. It also allows you to connect with investors across the country and around the world. If you think your business could benefit from more than just cash, but also a little business advice or mentorship, you might consider a startup incubator. Are incubators are large trading that offer seed money, trading mentorship, supplies, and sometimes even office space in exchange for a share of company options equity. Some of the most popular incubators are include Y CombinatorTechStarsStartupsand Capital Factoryamong many, many others. These incubators what sometimes specific to certain fields technology or entertainment, for exampleand and will accept applications for all types of the. Because the value of startup incubators is so great, acceptance into them is typically VERY competitive across all industries. Yea, yea, we know lawyers are expensive. When negotiating equity, your foremost concern should be maintaining control of your business. A term sheet should be viewed as a starting point for the pros, NOT a final contract. To negotiate a better deal i. Investors typically base their offers trading the level equity risk they perceive for the specific investment. For the most part, if you can make your business appear less risky, you can often negotiate a better deal. Two ways to make your business seem less risky: Present a sound business plan. Know what your goals are and be able to talk about them. Invest your own money. When you invest your own funds in your company, it shows the investor that you are confident the business will succeed, and that you are willing to do whatever it takes to turn a profit. The the investors see it, the more money you personally have on the line, the less likely you are to throw in the towel at the first major hiccup. Grasshopper US Grasshopper UK Academy Blog Resources.
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