FUNDING A BUSINESS IN CALIFORNIA
Got a sound business plan but the lack of capital is holding you back from starting a small business? Or do you simply want to expand your existing business? Do you want to do business with venture capitalists?
A company typically obtains initial capital through contributions from its owner, partners, members or shareholders, depending on the type of business entity. It may also obtain funding through equity financing, which concedes part-ownership of the business in exchange for capital contributions from investors—contributions that do not need to be repaid by the company.
Another typical way of obtaining funding is through debt financing. Because this type of raising capital involves a debt, it must be repaid by the company, together with its interests—an obvious disadvantage vis-à-vis equity financing. On the upside, debt financing does not result in dilution of ownership interest in the company and interest payments on the debt are generally tax deductible.
Debt financing may be in the form of bank loans, commercial paper or bonds. Essentially, all these forms are debt of a corporation with varying repayment terms. Bank loans may be a fixed one-time loan payable within a specific period, or it may be in the form of a revolving loan or line of credit. Commercial paper, on the other hand, is typically short term and unsecured, and one where a company issues a promissory note to the lender of capital, while bonds are generally long-term secured loans from the lender of capital, known in this instance as a bondholder; a bondholder is merely a creditor and does not have ownership interest in the company.
The attorneys at the Zurada Law Group are knowledgeable about business law and can help your business obtain funding. The ability to raise capital may be dependent on the type of business entity—whether your company is a sole proprietorship, a partnership or its varied forms, or a corporation.
For a FREE initial consultation, contact the San Francisco lawyers at the Zurada Law Group at 415-637-8483 or by filling out the Free Consultation space on this website.