Research shows that almost 40% of start-ups fail due to a lack of funds. Clearly, raising capital is a huge factor in the success of growing businesses. Here are some interesting options for how to raise capital for a business.
1) Use what you have for a start
First, take stock of your finances. You have to start with yourself. After all, that is one way of showing others how serious you are. Sometimes, you may find it difficult for others to believe in your business idea. Consequently, you may have no option but to invest your own money.
Again, this can be a positive sign to banks and investors as a sign of confidence. It also indicates a strong show of faith in the business.
2) Use your social capital
Second, take advantage of your social capital. In other words, convert your social capital – close relationships – into financial capital. Examples of close relationships include friends and family, past and present colleagues, and former classmates.
Surely, these people are more likely to listen to your business ideas and support you. However, do make sure your business strategy is sound so you do not disappoint their trust.
3) Target angel investors and venture capital firms
Third, you may consider getting an angel investor. They are individuals or groups who seek early-stage businesses to invest in. They may in exchange ask for equity or partial ownership. After all, some banks and investment firms hesitate to invest in young businesses because of the perceived higher risks.
4) Apply for business pitching competitions
In addition, you may look out for annual pitching competitions and apply. Such competitions usually feature business owners who pitch to potential investors and other stakeholders. Usually, there is no registration fee. You simply need a convincing pitch and a viable business idea.
5) Apply for government empowerment schemes
Moreover, you could target certain government grants, subsidies, and low-interest loans. Usually, these efforts by governments are used to stimulate business and economic growth. Similarly, you can take advantage of Special Economic Zones (SEZs) all over the world. They offer incentives such as tax holidays, waivers, grants, and subsidies.
6) Raise capital through Crowdfunding
Furthermore, you can use crowd financing to as your great answer to how to raise capital for a business. Interestingly, with crowdfunding, you simply look for multiple people to contribute towards the needed sum rather than depending on a single source.
7) Get loans from banks and credit unions
In the same vein, simply approach your bank for a bank loan. After all, that is one of the things banks do – lend money. One way to meet their criteria is to have a credible backer.
8) See if you qualify for economic development programs
Likewise, see if you fall into a category that can benefit from development loan programs. For example, women, certain minority groups, veterans, and people located in an economically disadvantaged region can get certain loans.
9) Make use of your spare assets
Finally, you can make recourse to property or items of value that you own. Examples of high-value assets include land, houses, stocks, bonds, and vehicles. You simply convert them into cash. Also, you could use them as loan collateral.
Nailing it down
There are a variety of options for you that help you solve the quandary of how to raise capital for a business. However, you should ensure you have a sound business strategy to make the investment worthwhile. This way, you, your business, and your investors will be happier.
