Starting a new business takes a lot of hard work and determination. Before anything else, however, you will need to think about where to get your capital. Yes, your capital – the money you need to raise so you can get your business rolling. Raising capital for your business idea is not easy, too. As such, it is important to find ways to raise the amount you need – or else you won’t be able to make good use of the business opportunity that has opened up for you. Follow these six tips if you want to know how you can raise a significant amount of capital to fuel your business idea.
This is actually one of the most popular ways of raising capital for a business idea. Bootstrapping simply means using your existing resources (your own money or your family’s, or contributions from friends) in funding your business concept. So instead of getting a bank loan, you borrow from family and friends. This is safer, and the interest rates are more flexible (and friendlier!).
Another popular way of raising capital is crowdfunding. Basically, crowdfunding means using the Internet to raise small amounts of money from a large number of individuals. What is usually done is you site up with a crowdfunding site (for free) like Kickstarter, IndieGodo, Microventures, and the site responsible for making the practice popular, ArtistShare. After signing up, you then create your campaign, providing a detailed explanation of why it should receive funding, and then specify the amount that you want to raise, as well as the period you need to complete the funding. Once the campaign is up, people access it and contribute by clicking a button. Aside from helping you find capital for your business idea, crowdfunding can also help market or generate awareness for your business.
3. Angel Investors
If you believe that you have a vast business network, you can turn to angel investors for your business’ capital needs. An angel investor is someone, particularly an affluent person, who provides a major one-time investment for a business idea or concept. In exchange, an angel investor usually gets ownership equity or shares, or convertible debt. Angel investors normally favor startups and small businesses.
4. Venture Capitalists
Although most venture capitalists prefer small businesses that have already kicked off operations and are way beyond the startup stage, you can still try to approach one or two. A venture capitalist is a private investor who provides financial support for small and promising businesses or startups. Venture capitalists offer against equity investments.
5. Bank Loans
Banks are usually the first option of business owners when they’re just starting to set up shop. Some business owners, however, make banks their last option, usually only after they’ve exhausted their other options (namely, numbers 1 to 4). Banks offer secured loans (where collateral is a requirement) and unsecured loans (no collateral needed, but the amount is not as large as secured loans). Unsecured loans are normally the priority of business owners raising capital.
If all your options have been exhausted and you haven’t raised enough capital yet, try setting up several fundraising projects. You can organize a pre-selling event for your products and services, for example. This may be quite far-fetched, though, especially if you’re trying to raise a large amount of money.
Have you decided which option to choose in raising capital for your business?