• There are benefits and risks associated with financing your new business.stack of cash image by jimcox40 from Fotolia.com
  
  Entrepreneurs who are looking to launch a new business venture may need to obtain financing to get the business off the ground. Financing can be obtained from banks, personal finance companies or even from family and friends. When considering whether to obtain any type of financing, some of the benefits and risks should be considered.
  
  

Immediate Funds

• When you obtain financing, you receive immediate funding that can be used to rent a building, purchase equipment, develop and implement a marketing plan or hire employees. As a result, you may be able to get your business off the ground faster, which means you could be making money sooner.
  
  

Immediate Debt

• The flip side of the benefits of immediate funds is the risk that comes with immediate debt. If you are unable to generate business quickly, you may have difficulty in making debt repayments, let alone making money. Also, your debt repayment installments may be so large that profitability may be limited for quite awhile, even if your business venture is a success.
  
  

No Personal Funds

• Another benefit of financing is that you won't have to tap into your personal funds or incur the risk of taking out a second mortgage on your home. The financing may be able to sustain you through the difficult early years of your business, and you may only need to tap into your personal accounts in the event of an emergency.
  
  

Harming Relationships

• If you resort to borrowing money from family or friends to start your business, you run the risk of alienating them if your business doesn't work out and you can't repay your obligation. Also, if you need additional financing, the amount of extra funds may be limited, and it can be difficult to approach a close friend or relative for money more than once.
  
  

Maintaining Ownership

• Depending on the type of financing you obtain, you can have the benefit of getting the money you need without having to give up an ownership stake. For example, when you use debt financing, you borrow the full amount you need from a lending institution, which requires no surrendering of ownership. This differs from equity financing where you receive funds in return for giving up a percentage of the business ownership to the lender.