Answer to Question #50727 in Economics of Enterprise for biruk

Question

Explain the sources funding available for the new venture. Give at least five examples.

Answer 1

Where and how you finance an operation can be the difference between dominance and failure. All money may sound like good
money in this environment. It isn’t.
1. Friends and family members. If you’re lucky, friends and family members might be the most lenient investors of the bunch. They
don’t tend to make you pledge your house, and they might even agree to
sell their interest in your company back to you for a nominal return.
2. Small Business Innovation Research (SBIR) grants. Getting past the paper-intensive application process and SBIR grants can
be a great way to turn your intellectual property into mailbox money.
3. Tax Increment Financing. TIF subsidies are geared toward real estate development in targeted areas. Depending on the state, the
subsidies can be as large as 20% to 30% of the cost of the project.
Better yet, you may even be able to borrow against this subsidized
value. If your own community does not offer a TIF program, look at
communities that do. You may end up a little farther from your home or
office, but it could be worth your while.
4. Internal Revenue Service. No, the IRS does not lend money. But it does allow you to deduct expenses. If you are paying a
heap in taxes, evaluate whether you can use your profits to expand your
business–and reduce your tax bill.
5. Bootstrapping: Many billion-dollar entrepreneurs find a way to grow without external financing so that financiers don’t control
their destinies or grab a disproportionate slice of the wealth pie.