Stocks and Options for the Startup Entrepreneur
Entrepreneurs who are trying to raise money traditionally speak in terms of debt rather than in investment. Stocks and options are a viable way for a business owner to raise money without dealing with debt at all; however, many people do not understand how to structure their corporation to take advantage of it. Here are a few ideas for using stocks and options for the startup entrepreneur.
First, you may want to consider leveraging the equity that you have in your business in order to raise money.
One of the best ways to use stocks and options in your business is to begin a C corporation and sell them. This is a great way to get the working capital that you will need for day-to-day operations without going into debt. Many savvy company owners will sell stocks and options to private investors ahead of selling them to the public market, completely separating these investments from their personal finances.
Second, if you do borrow money, you can place that money into stocks and options so that it can retain value until you need to use it.
Many people will place money that they do not need into bank accounts thinking that this is the best place for it. However, if that money is not used for a long time, it will lose value because of inflation. It is placed into stocks or options that have dividends or other methods of keeping pace with inflation, then the money that you do not need currently can work for you until you do need it.
Third, stocks and options can be a legitimate asset for collateral.
If you have outside stocks and options, these can be used as collateral for loans in order to finance your startup business. Banks will only give money to people who have assets in the first place, and any stocks and options that you hold currently will definitely go a long way in helping to ensure your financial stewardship to your banker.
Whether you are borrowing on stocks, selling them in order to raise capital or using them as a holding place for your unused loan capital, stocks and options are definitely a part of every savvy entrepreneur’s financial portfolio. Make sure that you have these assets lined up and ready to go for your startup venture so that you will not have to incur the debt of the average entrepreneur.
Jonah Engler is a Financial Expert based in New York City. A full time stock broker, franchise owner, coffee lover and investor; Engler helps startup businesses and franchise’s grow through smart financial planning.