6 Effective Options on how to raise capital for your start up business
If you read my post how to avoid spending too much in your business, then you will know that they is a need to know there is a difference between business money and personal money. There’s never been a better time to be a savvy entrepreneur. One thing you must know is that you must have a capital before you talk about stating up any business. Neither you nor any entrepreneur can be successful without first raising enough capital to turn your business idea into reality.
Unless you happen to be one of the few entrepreneurs that already has enough cash to self-sufficiently support a new business startup, you’re possibly going to need to find a way to raise some money for your startup capital. Here are our six preferred suggestions to you.
Six Ways on how to Raise Capital for Your Start up business
(1) Family and friends.
When seeking to secure funding, most entrepreneurs start with their friends and family. If you have good relationships, this is a good idea, as most of your loved ones will want to see you succeed. However, do not forget that anything that involves money can be rather problematic if you aren’t careful. Do not forget to put everything down in paper while borrowing money from your family and friends who are financially capable of helping you with your startup
(2) Bank financing.
Once you are done with your friends and family, the bank is the second most popular place to help you with the startup capital. Many local banks will happily grant small business loans to you, as long as you come with sufficient information and a detailed business plan. However, you may be asked to use some other form of equity (such as your home or any other landed property) to get your loan approved. Just make sure you understand what you’re risking when signing a small business loan from your bank.
NOTE: Make sure you know the value of what you are risking to avoiding the problem of selling your home or giving you a notice to quit from your home as this have sent many to their grave after developing HBP just because they cannot stand the sock of losing a business.
(3) Angel investing.
Angel investors are successful entrepreneur who have enough cash in their own portfolio to invest in other businesses. An excellent Example of this is the popular show Shark Tank. The major benefit here is that along with the cash, angel investors offer ongoing guidance and advice.
ALSO READ: What you must do in campus to make money
(4) Venture capital.
These are groups of savvy investors who contribute their money together to invest in early stage businesses with promising futures. In return for an investment, they typically ask for equity and/or debt financing. So you can get your friends who shares the same vision with you to contribute money and run a business for profit.
(5) Equity crowdfunding.
One of the newest modes for raising startup capital is what’s known as crowdfunding. There are typically two types of crowdfunding, and we’ll discuss the equity model first. Equity crowdfunding is when you use a website to raise capital from anyone who’s interested in your startup. In return, you offer a percentage of capital for each dollar invested. In most cases, you set a minimum amount you’re willing to accept and the majority of investors are business men, women, and other professionals looking to take a chance and diversify their portfolios. A typical example of Equity crowdfunding is GT GROUP.
(6) Rewards-based crowdfunding.
This form of crowdfunding is pretty much identical to equity-based crowdfunding, only instead of offering equity in return for an investment, you offer a tangible reward. This could be a sample product, tour of the facility, or a complimentary membership. Rewards-based funding tends to attract much smaller investments and targets average people who are more interested in the product or service than a long-term return. A typical example of Reward-based crowdfunding is the GNLD.
Before you comment and share this information, Also see reasons why being broke will make you a better entrepreneur.