One of the greatest challenges for any entrepreneur starting her own small business is raising enough working capital for a successful launch. The majority of new business owners bootstrap their way to success in the early months. But you can only take certain businesses so far without an injection of money. Cash for a start-up business is, in many ways, like jet fuel. It’s absolutely required to get you from where you are to where you want to be. Without enough of it, you will either never take off or might end up crashing before you get to your destination. Here are some tips to raise capital for a business startup.
Raise Capital For A Business Startup #1: Know What You Need
First, it’s important to know exactly what you need and why for your venture. So, no matter how you fund your business, you won’t shortchange yourself or go overboard with borrowing. I highly recommend that you prepare a detailed business plan for yourself before you do anything else. You will need this to secure funds as well.
Some entrepreneurs hire marketing or business consultants to help with crucial data in the beginning stage of a startup. These data analysis specialists use tools to flesh out their plan down to the dollar. They help to calculate the funds you need for startup and beyond. They also understand markets and how they affect various types of businesses.
Raise Capital For A Business Startup #2: Using Your Own Funds
Though it is frowned upon by many business consultants and bankers, using your own funds for a startup might be necessary. In fact, some banks might require a personal investment before they offer a loan. If you have set aside money for a business, by all means, use it to fund your dream. Another possibility is using an inheritance. I do still recommend that you have a line of credit available as well.
Raise Capital For A Business Startup #3: Secure A Business Loan
Securing a business loan is one of the most common ways to finance a business. The important thing is you are able to retain control of your company, in that you don’t have to give away equity to external investors. A business loan is limited, however, and may not sustain you throughout the challenging period of a startup. Their focus is on you repaying the loan with interest. Therefore, if you’re looking for a little more support in addition to up-front capital, you might want to consider seeking out angel investors.
Raise Capital For A Business Startup #4: Angel Investors
Pitching your business idea to a group of private investors may not sound like fun to you, but it could be an efficient way to fund your startup. There are plenty of businessmen and women out there who simply want to invest money in worthy up and coming businesses. Of course, they don’t give it away for free. They expect a sweet return on their investment. The details of this “return” need to work for both parties up front and in the future. Be careful about who you do business with and always do your research on any other companies involved in the deal.
Raise Capital For A Business Startup #5: Friends and Family
If you have people close to you who are willing to back your business for a small incentive (such as interest on the loan) this is one of the cheapest and most convenient options to fund your startup. However, borrowing money from friends and family can put an enormous amount of pressure on you to perform and can negatively affect the relationship if the business is slow or fails. Consider this option carefully. If someone wants to give you the cash and does not expect it back quickly, this might work. But know that it normally does not.
In addition to asking friends and family for cash, you can now ask strangers to help you raise money, as the concept of Crowdfunding is becoming popular on many social media platforms.