Tag Archives: raising capital

Things You Must Know to Raise Capital for Your Business

The following are 5 important things you should consider before you plan to raise capital for your business.

Analysis- The Capital You Need:

The first question you need to ask yourself is how much capital you will need for your new business venture. The answer to this question is a strong business planning. A complete and comprehensive business plan makes you think about your business critically, and identify the capital required for your business to operate at each stage of growth.

Analysis- The Capital You Need

Having a realistic picture about the current and future capital needs of your business can save you from chances of failure and debts. After all, even a freelancer needs to eat before his work is accepted, published and marketed.

Strategy- How to Raise Capital?

The next step after knowing the amount of capital you need is to look for the source from where you can raise the capital. This depends on your aim to raise the capital. The primary source of raising capital for startups is generally oneself in the form of home equity loans, credit card advances, loans from family, etc.

How to Raise Capital?

But in case you are thinking of taking your business to next level then you will have to look for private investors such as investment banks, accredited investors, and venture capital funds for capital. They usually propose an investment in the form of debt, equity, or a combination of both.

If you are confused about your options about the capital raising sources you can even consult a reputed business consultant or financial advisors. These people are expert and experienced enough to show you the right direction.

Explore- People Interested in Investing in your Business:

Raising large capital for your business can be challenging. Therefore, you will need to find out sophisticated investors seeking maximum return for assuming the risk of a new business venture.

Exploring People for Investments

The first option that strikes everyone’s mind is family and friends because they are less discriminating than professional investors. Other investor options are Venture Capitalists, Angel Investors, Institutional Marketplaces, or Crowdfunding Sites and Platforms.

Documentation- Know Your Legal Responsibilities to Potential Investors:

If you are seeking funds from individual investors, a legal responsibility towards them is necessary. These legal obligations and offerings are regulated through the US Securities Act of 1933 and the Securities Exchange Act of 1934.

A great business consultant will guide you through the procedures, making it simple for you to access the equity markets and compliance with the required regulations. This can help avoid future legal problems.

Negotiate- A Win-Win Agreement:

A funding event involves two parties- the investor and the company. In some cases there may be a single investor while multiple in some others. Some situations even reach to a take-it-or-leave-it while in others, there is intense negotiation. In some cases, parties strive to conclude at a point or an agreement that is beneficial for both.

Negotiation is a skill that comes through learning and practice. It is recommended to seek advice and assistance from a professional in order to make the wisest decisions.

How to Raise Capital for Your Startup Business?

Starters usually give up the equity shares to generate the startup capital. But if you want a quick move then it’s better to avoid traditional equity-based funding models.

Lets’ have a look at some of good alternative options that can support your fundraising capitals.

Friends and Family

No, we’re not asking you to run a business with your family or friends. But what’s wrong in borrowing some money?

For the startups who really can’t afford bank loans, asking your close buddies and family to make few investments seems a lucrative option.

Moreover, the support of friends and family is a valuable asset as they will not just invest their money in your startup business but also give you some guidelines to handle risks. So, they are like your strongest back support that will not leave you even during the adverse times.

Group of Indian people holding banners with $ symbols.

But you need to be a little cautious because generally people tend to control a part of your business if they make some investments. So, make sure you don’t mix money and relationships.

SBA Loans

The Small Business Administration (SBA) is a government entity that gives financial support to small businesses in the US in the form of loans and grants. The good thing is you can loan from them without diluting your shares and they offer mentorship programs.

Since this is a government based funding option, therefore you may have to fulfill their specific requirements.

sba-loan

Time is the biggest consideration while considering a loan from SBA. Sometimes it can also take up to six months for loan approval; therefore you should start with the procedure beforehand.

Bootstrapping

Another option to raise capital for your business is by bootstrapping. This is for the ones who are not able to convince investors or generate revenue from other options.

Since you cannot always wait for the perfect funding option therefore bootstrapping your business is the perfect idea.

Bootstrapping

One good thing about bootstrapping is you don’t have to impress the investors about the company’s growth levels.

Grants

This option is ignored by most of the people. Government and private sector grants are one of the best options to raise capital for your startup business. They don’t require any equity to obtain and you don’t even need to pay them back.

You just need to find the right funding option for your business, beyond that you just have to fulfill the requirements of the application. Private sector grants may seem easy to find but it’s difficult to get approved.

Government grants are available are not available throughout the year and they also have a long application process. So, you need to start on time.