A BORSA Plan Combined With Investment Funds Is Perfect Start-Up Capital

As a prospective small business owner, finding start-up capital is probably your number one priority. In lieu of taking out a traditional business loan, there are many other viable options available such as seeking an investor or using funds from a 401k, or both. In addition to money acquired through an investor, a BORSA (Business Owners Retirement Saving Account) plan allows you to use the holdings in a 401(k) pension plan, profit sharing 401(k), a 403(b), 457, or IRA rollover to apply toward your new business. As a rule, withdrawing from such funds before age 65 will land you with serious penalties, but through the BORSA plan you can access your money without receiving early withdrawal taxation.

When faced with the question of what type of investor is appropriate for their growing business, many entrepreneurs find themselves unsure of which path to take. Should they seek the assistance of an angel investor or try appealing to a venture capitalist?

Angel Investors

An angel investor, or informal investor as they are sometimes called, is typically a wealthy individual who is willing to invest his or her personal money in smaller amounts. Mainly new businesses tend to benefit from the graces of an angel investor over a venture capitalist. As angels are often retired executives or entrepreneurs, they may be interested in investing for reasons that exceed monetary gain. These include making use of their experience and networks, mentoring, and staying abreast of current business trends. An angel investor may also be more involved in the growth of a business and provide valuable managerial advice.

Venture Capitalists

As venture capitalists tend to be motivated by profit, they usually only invest in companies with major growth potential. Working in groups or in a firm, venture capitalists generally will not consider deals less than several million which can either be beneficial or a waste of time to pursue. Often the major difference is that venture capitalists invest other people's money while angel investors invest their own money. Venture capital investments are usually made as a cash in exchange for a  company’s shares, and usually come at later stages in the business after notable growth has occurred.

The Bottom Line

According to the Journal of Private Equity, angel investors tend to provide 11 times the amount of capital provided by venture capitalists and 70% of the capital for start-up businesses. The decision to seek angel versus venture capital needs to be based on the amount of money required to get the business up and running. Preparing a valid business plan will improve the chances of impressing a potential investor.

In addition to money obtained from investors, a BORSA plan can also be a smart, hassle-free source of start-up capital. To learn more about how a BORSA plan can benefit your small business, contact the DRDA/CPAs in Houston at www.drdacpa.com or www.borsaplan.com or just pick up the phone and call 281-954-6040 today. Realize your dreams of business ownership today!