8 Simple Ways to Raise Capital for Your Business

One of the most challenging tasks every aspiring entrepreneur faces is raising sufficient capital.

In a nutshell, capital is the amount of money that a business needs to propel its activities. This can be used in manufacturing a product, paying your employees, and spending on overhead costs.

However, raising enough capital for your business is not easy. And while there are several ways you can raise money for your business, it needs determination and patience.

Nonetheless, we have listed eight ways you can bring in funds to kickstart your business.

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1. Loans

One of the ways to generate business capital is to ask your bank for a loan. Chances are, a lot of banks are more than happy to provide you with a loan, given that you have a good credit rating and history.

But before they can provide you with a loan, they need to see your business plan first, along with your expected expenses and source of income. Once the loan has been approved, you need to pay the bank with interest.

2. Crowdfunding Campaign

There are many successful crowdfunding stories out there. With the right pitch and products, you can easily be one of them.

Crow funding provides you with the opportunity to connect with like-minded individuals. And these are people who may have a measly sum to help kickstart your business.

But to draw interest in your campaign, you first need to gauge what resonates with people and what doesn’t. Doing so allows you to improve your product along with your pitch.

Apart from that, crowdfunding will enable you to raise enough money to raise capital for your business.

So, how do you develop a successful crowdfunding campaign?

One of the key ways you can raise money on crowdfunding sites is to develop a story. People on crowdfunding sites are often curious about how you can turn your idea into reality.

Come up with a good video pitch that showcases your product value, the need it serves, and why you need support. Having a great website and a good PR strategy can help a lot, too.

3. Bootstrapping

Given that you’re not in an industry that requires an enormous amount of startup capital, funding your venture can be feasible.

Let’s say that you don’t have enough savings to run an entire business operation. You can still opt for a 0% interest or a low-interest APR business card. This gives you a chance to borrow cash for a specific timeline without incurring a lot of interest.

Funding your own business indeed carries a lot of risks. But it would help if you considered your potential as well.

Moreover, investing your own money into your business will encourage more lenders and investors to partner with you in the future.

4. Angel Investors

Angel investors are wealthy, accredited individuals who are looking to fund businesses. They sometimes partner with other angel investors as well.

However, keep in mind that angel investors are also professionals. They would want to see a proper business plan from you first before they can think about investing.

Angels can take on a mentor, or an advisor role in your company, too. So, they must be knowledgeable enough about your industry. You can look up accredited investors at the Angel Capital Association.

Make sure that you look for those that are in your region and field, as well.

5. Venture Capital

Venture capital funds are usually managed by a team with a keen eye for startup ideas with high potential. And by “high potential,” we mean startups that can bring forth change and significant return-on-investment.

They usually invest in a solid business plan instead of equity. Private equity investors are more interested in purchasing all or a portion of a company in hopes of reducing cost and using leverage to create value. Venture capital investors, on the other hand, will likely pull out and look for other investments after an IPO or acquisition of the business they’ve partnered with. Understanding the difference between private equity vs venture capital is key in choosing the best fit method of raising capital for your business.

Just note that venture capitals will stay loyal to your business until they have recovered their capital and profits. This usually happens in 3-5 years.

Venture capitals also look for more prominent companies that have proven their level of stability over the years.

This can be relatively challenging if you’re still a business startup that hasn’t achieved this level of stability.

6. Grant

Depending on where you live, your national government provides business financing through grants or microcredit.

You can be granted a government grant or loan if your business idea can contribute to a country’s growth or help a particular area or industry.

For example, the US Agency for International Development provides many programs to participate in if you want to get a government grant.

7. Ask Friends and Family

In the same way, you can also ask your friends or family for some money to raise capital. Chances are, these people are close to you and are there whenever you need them.

Just make sure that there’s something for them as well. You can ask them to loan you some money and then pay it later on with interest within your payback period.

Similarly, you can also ask them to become your business partners.

Whatever you plan to do, keep in mind to be always upfront and honest with them. Obtaining funding from friends and family is one of the unique ways to kick off your business.

8. Private Investors

Another way to raise business capital is to get in touch with private investors. Nonetheless, you should look for a venture capitalist that funds startups similar to yours.

If you are building a Life Science startup, an excellent VC example would be Biospring Partners, co-founded by Michelle Dipp and Jennifer Lum. But if you are in beauty and wellness, Biospring Partners might not be for you. Nonetheless, you can find a suitable VC.