Why Do You Need Venture Capital

It is not easy to venture into the world of business. Starting it up is already a hard task as you need to know where you'd get the capital to put it on the go. You also need funds to expand it for a bigger profit. This is the common problem of aspiring entrepreneurs. However, there has been a formulated solution to this problem. Venture capital would be an aspiring entrepreneur's assistant in their smallest beginnings.

What is a venture capital? These are loans issues by investors to small businesses and firms to be used a capital for the starting businesses or as funds for the development of small firms. It can also be termed as a business loan since its main purpose of issuance is for business assistance.

For the lenders, venture capital is a high profiting track. Despite the success or failure of the business who issued a business loan from them, the lenders still have the right to place interest on the borrowed amount from them. Also, they become shareholders of the companies/small businesses that applied for a loan from them, however this might not be true in every case.

Investors also tend to choose who they will issue a business loan to. Most likely, they would render a venture capital that is definitely to grow in a time frame of five years. Whether the business has already been established for years or is just starting up, they would choose to assist those that have fast growth in the industry. This is to earn more than just the interest issued on the loan but also to have long-term income from them.

But how long do venture capital investors hold their investment in a certain firm? It usually lasts from three to seven years. The time depends on the development of the firm. If the firm who issued for a business loan is seen to have a quick development, the link between the venture capitalists and the firm will end sooner. However, for those starting firms with a slower development, the link between the two may last longer.

Not only does the venture capital business help other businesses start and grow, it also opens more doors for employment. In the United States alone, the venture capital business contributed 21% to the country's GDP. 2 million firms would apply for a venture capital every year. These firms they assist would require more workers and result to job opportunities.