Start-Up Financing

Money used to start a business or purchase assets. Banks tend to view entrepreneurial ventures cautiously and rarely make loans to newly organized businesses without taking Collateral and if the business venture is a corporation, personal guaranties of the starters. If the entrepreneurs obtain Venture Capital financing, a bank loan typically serves as a second level of funding; the bank loan becomes a source of Working Capital loan to finance conversion of inventory or receivables into cash receipts, whereas the venture capital funding is a source of longer-term Equity capital that ultimately becomes the source of profit to the owners if the firm becomes successful. See also Business Plan; Co-Maker; Corporate Resolution; Financing Statement; Guarantor; Key Man Insurance; Security Agreement; Security Interest; Seed Money.