How to Raise Capital to Start Your Business
One of the most difficult parts of starting a business is getting the funding together. Without it, your big idea for a growing business won’t get off the ground. However, trying to raise the capital you need can also be a difficult issue, so you need to think of successful ways to fund your venture. Here are some useful ways that you can raise the capital you need.
Assess Your Needs
Before you go looking for support, you should assess how much you will need to get started. You need to be thorough as there will be small expenses that you might forget that could add up to a lot of money. It is important that you try to be as economical as possible. Not only will this mean you need less capital, but it also ensures that you can keep the company trading for longer in any lean spell. As well as set up costs, you also need to think about daily running costs. Your company won’t make a lot of money straight away, so you need money to keep you trading for the first few months.
Asking Friends and Family
Going to your friends or family for capital might sound like a bad idea, but there are many benefits to doing so. Your close friends will know you well and will likely know about your new venture. They are in a good position to see how much time and effort you have put into your business and help you to get it started. However, there needs to be something in it for them, or they might not be willing to loan you the money. Perhaps you can pay them back within a certain time period with interest. It will give them a timeframe to consider, and also some extra money as a thank you for the loan. Another idea could be to take them on as partners in the company; this can be especially helpful if they have a skill that you need. In some ways, family members are more likely to help you than friends, especially if there is a strong family bond. The thing to remember is that even though they are your friends and family, they still need to be involved. You need to be open and honest with them about the company and its prospects.
There are many successful business people out there that want to give back and help those who are starting out like you. These are often called angel investors because they will take on a new company and give it the capital it needs to get started. Investors will be looking to get something back in return, so you need to think about what you are prepared to offer them. As much as you want your company to become a reality, you don’t want to be offering more than you are comfortable with to an investor. Some investors are silent partners which means they won’t be involved in the running of the company, but only take their percentage of the profits. Others like to be active within the company, and this can be a good thing because they have been where you are now, so they might be able to offer you valuable advice.
Many people are now using investing as a way to generate some additional money. Although many use investments to fund their retirement or supplement their income, there is no reason why you cannot use it to fund your new business. The important thing to remember is that you are investing in areas that you know and that are a risk you are prepared to take. Although it is a good idea to get advice on what to invest and where, these stocks are your responsibility, so the ultimate decisions should be yours. One of the most stable and long-term investments is property, which can also help you with your own new business. If you invest in an office building, then you can use one floor for your own company and let the others out to raise capital. You need to ensure that the money you are raising from your investments is able to fund your new company. If you had intended it as a source of additional income, then you should make sure that you can cope without it financially.
Although there have been many stories about banks lending less and becoming stricter with their criteria, they are still a good way to get the capital you need. As with all of these options, you need a business plan to show to the bank, and it will need to be well laid out and detailed for them to consider it. Loans from the bank are better in some ways because you have legal protection and a structured repayment plan. They can also help you further once your business starts doing well, which others like friends and family might not be able to do. The bank will set out a repayment plan with you, and you need to check that it is achievable before you agree.
The emergence of crowdfunding in recent years has enabled many companies to get off the ground, and they are also a good way to get your customers involved in the process. With crowdfunding, you put your business idea on one of the funding websites and ask people to sponsor the idea. If they like it, they will contribute a little money towards your funding target. The better the idea, the more funding you will receive, and the faster you will reach your goal. In return, you offer these individuals an advance product or some other incentive as a thank you for their contribution.
While trying to get funding for your new business can be hard, there are many opportunities out there for people that want to become an entrepreneur. Perhaps in the future, you will then be able to help others get their first business started.