You need capital to start a business and your need for financing can vary depending on the scope or type of the business venture, whether new investment is needed and/or the type of premises needed. Sources of capital can include internal financing (the entrepreneur’s own investment in the business) or external financing.
External financing is primarily composed of loans. Business loans can be sought from commercial banks or the Finnish state-owned Finnvera. Finnvera also provides guarantees as collateral for credits received from banks, insurance companies or other lenders and for other bond guarantees, such as delivery collateral. Short-term financing options can include various leasing arrangements, as well as credit and/or equity advancement or credit cards.
Venture capital placement is also a viable option. Venture capital investors (an angel investor, capital placement company or venture equity firm) invest in businesses in return for an equity stake or stock in a company (normally less than 50 % of stock ownership).
There are also other various forms of funding, such as grants. Grants are normally means-tested and require a business venture to be financially viable. Centers for Economic Development, Transport and Environment (ELY centers) and Tekes–the Finnish Funding Agency for Innovation, both provide various types of grants to businesses. When putting together a business idea, it is important to remember that a business cannot be solely dependent on external financing or grants but should instead demonstrate profitability without any external support.