Business

How to Raise Capital to Start a Business

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You need to spend money to make money. So when you’re starting a new business, you’re going to need some capital. This can come from your own savings or outside investment. Here’s how to raise capital to start a business. 

Bootstrapping

This is a popular method with many small businesses. This involves saving or borrowing money to start your business, with the aim of reinvesting any profit back into growing the business. Bootstrapping typically means you are starting a new company from scratch and don’t have much capital for investment – however, it is possible to use bootstrapping techniques when funding an expansion project in an existing business.

Government Grants

There are many grants available for businesses, as well as government support schemes aimed at boosting entrepreneurship. There is a vast array of sources of funding that you could apply to. Talk to your current and former employers and any other contacts you may have in the business community, to see if they can point you towards a grant or startup loan you may not know about.

Angel Investors

There are a growing number of entrepreneurs who are willing to invest in businesses that they believe have the potential to become successful. However, you will need to prove the viability of your business and show them that you have created a solid business plan which covers all the key areas like sales forecasts, profit projections, and marketing strategy.

Venture Capitalists

Venture capitalists will typically only provide funding to businesses that have grown beyond the ‘seed’ phase and have a proven track record of results. They are looking for businesses that have high growth potential and whose founders are committed to taking their business further than where they could reach on their own. 

Offload Assets 

If you have already accumulated a portfolio of valuable assets, such as real estate or classic cars, you could use these as leverage against receiving a loan for your new business. This will help fund the purchase of additional equipment and stock to get off the ground. You could even consider selling luxury car collections, artwork, property, and more.

Business Loans

If you’re going for a business loan, make sure that the lender is accredited and looks at your specific situation rather than just your credit score. There are many types of business that may not be considered mainstream and credit rating agencies will only look at a limited number of factors such as your financial history. Business loans can come from banks, finance companies or even the government, so shop around and see what’s available to you.

Crowdfunding

Crowdfunding is an interesting option that allows you to raise money for your business by appealing directly to the public. Websites like Kickstarter, IndieGoGo, and PledgeMusic will allow you to set up campaigns with a funding goal and then share it on social media. This provides an opportunity to get people involved in your project from the very beginning.

Family Donations

If you’re lucky enough to have a family who is willing to invest in your business, this can be a great option. However, don’t expect them to hand over the money on a plate – they will want evidence that you know what you’re doing and that they will see a return on their investment.

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