7 Easy Ways to Raise Capital For Your Business
If you want to know how to raise capital for your business, you’re not alone. In 2016, 73% of small businesses used some form of financing.
As an entrepreneur, you face many challenges. But, none are as big as finding money to start your new business.
From renting office or production space to buying goods and hiring staff, everything you need to do to turn your idea into a viable business requires money.
Unless you’re independently wealthy or were left a nest egg from a benevolent relative, you’re probably going to have to work to get that funding.
While money doesn’t grow on trees, there are a number of ways you can seek funding for your business some more traditional than others.
As the founder of a startup, you’ll find that raising capital is a significant part of your efforts and, for better or worse, a major challenge.
The biggest excuse which people give for why they are not in business is that they don’t have capital. True, you need capital to start and operate your business.
Capital is the lifeblood of business. If you run out of it and lack access to additional resources, the game is over.
Looking to raise capital for your startup business?Raising capital for business can be tough .
WHY RAISING CAPITAL IS IMPORTANT FOR A BUSINESS??
Having an idea is useless if one does not have enough capital to translate it into a reality. Entrepreneurs lack the resources to make it happen. The truth is, getting finance can be very straightforward once you understand the process.
Having access to cash can mean the difference between companies expanding or staying behind and being left in the lurch.
This article outlines 7 ways to raise capital for business.
Raise capital ## Bootstrap your business
In business, “bootstrapping” means starting a business without external help or capital , usually with their own personal finance.Bootstrapping a company might seem like a risky proposition , nearly every startup was bootstrapped at some point.Investing some of your own money will usually make investors and lenders more willing to partner with you down the line.
The more you can bootstrap in the beginning to achieve good market validation, the easier you are going to find your path to raising capital.
Bootstrapping is a slow process, and requires a significant amount of work on the part of the founder(s) for Raising capital.
Some businesses need money right from the day 1 and for such businesses, bootstrapping may not be a good option.
- Funds can easily be accessed.
- More Responsibility.
- Little or no obstacles
- Flexible interest rates.
- Bootstrapping doesn’t work for large businesses; it only works for small-scale enterprises.
- Lack of Investor support.
- Personal risk.
Crowdfunding is one of the newer ways of Raising Capital that has been gaining lot of popularity lately.
There are many crowdfunding success stories out there. And with the right products, you can be one of them.
How Crowd-Funding Works ??
Crowdfunding brings investors and entrepreneurs together by making use of easy accessibility of huge networks of people through social media and crowdfunding websites.
Individual mention the goals of his business, it’s potential for growth ,plans for making a profit,how much funding he needs and for what reasons, etc on Crowdfunding platform .
Using crowdfunding websites entrepreneurs and individuals have been able to post online appeals for cash.
Some of Best Crowd Funding Websites:
- It can be a fast way to Raise Finance with no upfront fees.
- There’s not much financial risk
- It is a good way to test the public’s reaction to your product.
- Someone could steal your idea.
- It takes time and money
Raise capital ## Angel investors
Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. Angels investors usually invest their own money, unlike venture capitalists who manage the pooled money from many investors.
Not only can angel investors offer financing to get your business off the ground, but some are willing to provide guidance based on their own experience.
Many of the biggest tech companies today, including Google and Yahoo, were funded by angel investors.
Here are a number of organizations that can put your business in contact with angel investors, both individually and in groups: .
- Angel investors offer mentor ship alongside capital for startups.
- Angel investors are willing to take risks.
- All industries are eligible for funding.
- Terms can be ambiguous .
- Founder control is reduced.
- Funding can be slow
Apply for a Bank loan
Banks are popular sources of business financing for small businesses. Funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.
To get approved, you typically need to meet requirements like the following:
- You have been in business for 2 years or more.
- The business has strong annual revenues (typically at least $100,000).
- Good credit (like a score of 750+).
Raise capital by Venture Capital
Venture capital is a type of financing that is provided by firms or funds to small, early-stage, emerging firms that are deemed to have high growth potential, or which have demonstrated high growth. (WikiPedia)
Contacting venture capitalists is also a great way to raise capital; however, it is often one of the hardest.
A venture capitalist invests in large growing markets and new technology. They usually Invest a minimum of $1 million. Not all the venture capital firms participate in investing in startups, they would often prefer to invest at a later funding stage.
However, venture capital companies usually don’t fund businesses that have not started to operate. They prefer to invest which are already operating and are already profitable.
- Venture Capitals effectively monitor the progress of a company they have invested in, thus ensuring the sustainability and growth of their investment.
- Achieve Goals Faster.
- A Lot of Capital.
- Funding is relatively scarce & difficult to obtain.
- Your investors own a stake in your company.
- very strict terms for their investments.
Raise capital by asking friends and family
Raising capital through friends and family is a viable option for many. It is one of the most common forms of Raising Capital out there. Banks and independent investors might not want to risk money on you.
This may be a good way for you to raise money as they love and care for you but it is not fun when you lose it as it may affect your relationship with that person forever. A good way of raising funds from your family may be if you choose those who have the knowledge of business and its risks while investing.
Friends and family should understand the risks of investing and know that there is a substantial risk that the investment may amount to nothing.
Raise capital you need to drive forward
There are several ways to raise capital for your new startup. All you need to do is choose one that is best for you and your type of business. Begin with going through all the options that are beneficial to you and your business, then slowly cut down to the best options that will reach your goals.
Also, consider the fact that gaining funding may be a long process and you may not be successful at first. Evaluate your progress at every level, keep an open mind and follow the tips. All these things will help you have a successful startup.
The key lesson here is that you have many options for financing your business. Don’t get discouraged if one doesn’t work out. By demonstrating due diligence and being resourceful and persistent, you can raise the capital you need.