Photo by Kelly Sikkema
Originally Posted On: https://www.bmmagazine.co.uk/business/how-to-start-raising-capital-for-your-business/
Starting a business is something that many people aspire to do. Here’s how you can start raising capital for your business!
Interested in starting a new business from the ground up?
There are some instances in which you can kickstart a microbusiness for just a few thousand dollars. But more often than not, it’s going to take a lot more than that to get a small business up and running.
This is going to make it very important for you to figure out how to go about raising capital for your business. Even if you have the best business idea in the world, you’re not going to be able to get anywhere with it without making a push to raise capital for it.
Fortunately, there are a whole host of ways in which you can raise money for a business. You should give as many of them as you can a try when you’re on the hunt for capital in the early stages of setting your business up.
Let’s take a look at some of the best ways to go about raising capital for your business and giving it every possible chance to succeed.
Begin by Seeing If You Can Afford to Dig Into Your Own Pockets
Is there any chance that you could potentially fund your own business without having to go through the hassle of raising capital? This would be considered a best-case scenario for you.
Crunch the numbers and see how much it’s actually going to cost you to start up your business. Then, take a look at your personal finances and figure out if you have enough money set aside to invest in yourself.
Doing this will, of course, require you to take on a lot of risk. But if you’re confident in your business and feel as though it’s going to be successful, it’s a risk that you should be more than willing to take.
If you can’t afford to fund your operation on your own using whatever money you have stashed in your savings account, you might also want to look into obtaining a 0% business credit card in your name. You’ll have to use your own personal credit history to do it.
This could prove to be risky if you rack up a bunch of credit card debt and aren’t able to generate profits with your business from the start. But it could be a risk worth taking if none of the other options listed here pan out for you.
Consider Asking Family Members and Friends for Help
Do you happen to have a rich uncle (or aunt!) who is always looking for something new to spend money on?
They should be one of the first people you call when you’re raising capital for a new business. They might be able to hook you up with all the money you’ll need to get your business going.
But even if you’re not blessed with a relative with a big bank account, you should still consider asking some of your family members and friends to invest in you. You might be surprised to hear that several of them have enough money lying around to lend some to you.
That being said, you should be aware of the fact that borrowing money from family members and friends to start a business can cause complications in your relationships with them. If, for whatever reason, your business goes belly up at some point, it could result in a rift forming between you and those closest to you.
It’s why you should always think long and hard about whether or not you feel comfortable borrowing money from people you know. The last thing you want to do is lose your business and some of your closest family members and friends in the end.
Look Into Launching a Crowdfunding Campaign
Do you want to raise capital for your business while also proving that there is a demand for the product or service that you’re going to sell when you get it started? You might be the ideal candidate for a crowdfunding campaign.
There are lots of different crowdfunding sites set up these days that are designed to help business owners raise the capital they need for their companies. These sites will ask you to create a campaign for your business and convince people to agree to help fund it in exchange for whatever it is you have to offer to them.
Many people enjoy taking part in crowdfunding campaigns because it makes them feel like they’re a part of the process as far as starting a business is concerned. They’re able to play an active part in helping you start your company while also getting something in return for it.
If your business is going to sell a product or service that requires extensive explanations, it might not be right for a crowdfunding campaign. But if you can generate excitement around your business with a quick video or explanation about your products or service, it’ll be perfect for crowdfunding.
Attempt to Take Out a Small Business Loan
Have you kicked around the idea of taking out a small business loan to start up your company? This is the approach that the vast majority of new business owners take.
However, it’s not always easy to secure a small business loan, especially if your business doesn’t have much of a history. Most lenders will ask that you have at least two years of experience under your belt before considering you for a loan.
They’ll also want to see some decent revenue coming in and a good credit score on your part. Some small business owners aren’t able to meet all of the criteria that they have to meet to take out a small business loan.
It never hurts to try to take out a small business loan, though. Just be prepared to put your best foot forward when you’re seeking a loan from a lender by showing them that you’re organized and ready to go.
Find Out If You Might Qualify for a Microloan
Are you familiar with microloans and how they operate? If you’re not, now would be a great time for you to familiarize yourself with them on behalf of your business.
These types of loans are often reserved for non-profit organizations. But generally speaking, microloans are designed to help impoverished borrowers who aren’t able to provide things like:
- A great credit history
- Proof of steady employment
They’re supposed to be used to assist those who are trying to escape poverty to get their hands on the money that they’ll need to do it.
This can make it challenging for those who apply for microloans to get approved for them. They have to be able to convince someone that they have a great business idea and show that they aren’t able to obtain funding to pursue it any other way.
But you shouldn’t let the obvious hurdles associated with microloans slow you down if you suspect you might qualify for one. It can help get the seed money you’ll need to grow your business in no time.
Look Around for Angel Investors in Your Area
Have you heard the term “angel investor” used before? It’s a term you should know if you’re interested in raising capital.
Over the years, a large number of businesses that have gone on to accomplish great things have gotten their start thanks to angel investors. This includes companies like Google, PayPal, and more.
Angel investors are individuals who have enough money in their bank accounts to invest in businesses that they believe are going to be a big deal one day. They invest in these businesses because they offer much higher potential returns on investment than their other options.
If you’re going to try and entice an angel investor to invest in your business, you should learn about some of the biggest angel investors of all time. You should also attempt to track down the names of some of the angel investors operating in your general area at this time.
Angel investors aren’t always willing to part ways with their money easily. You’ll need to wow them with your business and show that you have a plan in place to help it grow into a much bigger deal than it is right now.
But if nothing else, it’s a good idea for business owners to consider trying to score a meeting with an angel investor before considering their other funding options. An angel investor might provide you with valuable feedback on your business ideas and help you rethink your strategies going forward.
Try to Convince Venture Capitalists to Invest in You
Do you want to get access to more capital than the average angel investor is willing to provide? Then you’re going to want to look into trying to convince venture capitalists to invest in your business.
Venture capitalists are usually willing to invest more money into new businesses than angel investors. But in return, they also usually want to have more of a say over how a business is going to be run once they’ve invested in it.
Just like with angel investors, it’s not super easy to get venture capitalists interested in investing in a new business. You need to captivate them with your business idea right away and show that it’s something that has a good chance to work.
You also need to be ready to prove that your business idea has worked to some degree over the last year or two. As anyone who has ever watched the hit TV show, Shark Tank, will tell you, “Sales?” is a question you’re going to get asked early and often by VCs.
But if you’re successful when pitching VCs, it’ll provide you with everything you could ever ask for in terms of jumpstarting your business. VCs will be invested in your success and will, therefore, go above and beyond to get a great return on their initial investment.
Search for Firms That Will Invest in a Specific Project for Your Business
Is there a very specific project that you want to take on to take your business to the next level? If you’re searching for capital for this purpose, you’ll want to search for firms that specialize in project funding.
These firms will be able to provide you with long-term funding for a project that your business is going to take on. Businesses that are going to be tackling construction jobs, for example, will turn to firms that can handle project funding.
If your business is still very small, most of these firms aren’t going to be the best choice for you when it comes to raising capital. But as you grow, you’re going to want to have one of these firms on your side to fund the various projects that you take on.
It’s not a bad idea to get to know these firms and learn about what they bring to the table. It could help your business out in a big way in the not-too-distant future.
Raising Capital for Your Business Will Get It Off to a Strong Start
Starting a business and building it from the ground up can be a very fulfilling experience. You’ll have so much fun coming up with business plans and attempting to carry them out.
But you’ll also find yourself stressed out beyond belief if you have a hard time raising capital. You might not know where to turn to put your new business into a position to succeed.
Try some of the things that we’ve laid out here when you’re in the process of raising capital. Depending on what type of business you want to start, you might find that at least one of them will be a terrific option for you.
Want to get more tips on how to start a small business and turn it into a massive success? Read our other business article to get all the advice you’ll need to do it.