7 ways to raise capital for your business

7 ways to raise capital for your business

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7 ways to raise capital for your business

As long as humanity persists, there will continue to be business. In fact, man has engaged in one form of business or the other since the beginning of time. In the course of time, several changes have occurred and setting up a business has becomee ven more complicated.

One of the primary conditions is getting capital for your business. For many, this is their main source of livelihood. For some others, it is just a side hustle. But whichever way you look at it, most, if not all, organizations are businesses and operate as such.

With the rising cost of living across the world comes a greater responsibility for more families to seek alternative sources of income. Here comes the need to start a business. Once the idea is derived, assessed and deemed marketable, the next step is usually to raise capital for the business. So the question is; what are the best ways to raise money to start your business? I have put together a list of the 7 best ways to raise capital for your business.

● PERSONAL SAVINGS

This is, obviously one of the easiest ways to fund a startup, but only if you have the money. With personal savings, you get to set your own rules and you don’t have to share your stake or liability with anyone else. As a post on
smallstarter.com says; It only makes sense that you put your money where your mouth is. If your idea is as brilliant as you say it is, you should have no problem committing some of your own
hard-earned money to it! This type of capital is easier for people who already have a job or some other source of income. Besides, others will readily commit their funds to your business if they see that you have done the same.

● FAMILY AND FRIENDS

Family and friends are golden. You’ll often realize how amazing some of your friends are when you need capital for a new business. This is another easy way to raise funds because friends and members of your family will usually not drill you as much as a bank or investor would. But it will be much easier if you have already put in your savings and realize you still need more money. Money from family and friends can be
a gift, a loan or an investment. While there are complications to this form of capital, it great when family and friends can support your business.
Entrepreneur.com says you don’t have to be formal from the onset because business with a close network is usually based on trust. They say the “kitchen table pitch” is really about selling yourself. Be frank about the risks, and explain what the money will go toward and how it will grow the business. Then follow up with written materials later.

● SEEK PARTNERSHIP

A partnership is a more formal way to raise capital for your business, even if it is with a member of your family or friend. You get to realize that it takes more than a great idea, skills and passion to set up a business when you have concluded plans and lack the funds to execute them. You need a partner, but not just any partner. You need a partner who’s got the cash to spend. Ensure that the type and terms of partnership are well defined, documented and legalized. This is to avoid issues that may come up in the future.

● VENTURE CAPITALISTS/INVESTORS

Venture Capitalists are actual investors. These investors will, more often that not,
want a stake in the business as a result of the capital they’re providing. Whether you
like it or not, you may need to fly on the wings of an angel investor when you need to
raise capital for your business. Jason Njoku of Iroko TV comes to mind. If you think
about how he cooked up an idea and got a certain Sebastian Gotter to invest $30,000,
you’d realise how far angels can take you.

● BANK LOANS

This is one source of business capital that everyone tries to avoid. Banks are a major
headache to businesses who seek loans. Their double digit interest rates are a major
discouragement to many lenders. Banks are out to make profit, so when you approach
your bank for a loan, the conditions may be very stringent. Tim Berry, in his post,
explains 10 different things a bank would ask for when you apply for a loan. They
include a collateral, a business plan, financial details, and details of bank account
statement. So you can approach your bank with a good plan, and just maybe you’ll
get that loan.

● GRANTS

Grants can also save you a lot of headache when setting up a business. They’re not
very easy to come by though and when they do, you must use them judiciously. A
grant can come from the government, non governmental organizations, multinationals
and even philanthropists. The good thing about grants is that you don’t have to pay
back. However, one disadvantage of getting free money for your business is that you
may not pursue as much returns as you would’ve if you got a loan that you needed to
pay back.

● ADVANCE PAYMENT FROM CUSTOMERS

You may be lucky to find customers who are willing to pay upfront for goods or
services you offer. When the happens, you can use such money as capital. Sometimes,
all you need is trust, but other times, you may need to present a good business plan
to convince the potential customer that you can deliver. Just be sure you can put
your money where your mouth is and deliver on your promises.

FINAL WORDS

While these 7 ways represent very good ways to raise capital for your business, there
are other means too. You could try out crowdfunding or even consider selling a few
assets if it comes to that. Whatever the case, just be sure to put together a great
profitable plan before you even begin to look out for best ways to raise capital for
your business.

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