One of the most important yet hard tasks that entrepreneurs face when starting out their business is raising capital. Capital is simply the amount of money a business has in their disposal when it comes to spending on various business activities. Raising funds is never an easy task. It requires discipline and determination to meet the targets.
When it comes to raising capital, there are a number of ways one can go about it. Let us look at some of the most viable ways one can go about it in raising capital for their business.
Raising it yourself
One of the simplest and most applicable ways to raise capital for a business is doing it yourself. Most founders put aside some capital in terms of savings for their business. It can be saved that arise from your 9-5 job. Others spend some extra time off their work working to save some extra cash for their business.
Family and Friend
If you are coming from a family that is well established, a key way of raising capital is linking up with family members for the same. Any business will always involve some level of risk. You might have a great idea but it turns out to be far out of a touch of reality. When you have friends close to you, they may give out their honest opinions besides contributing to your business.
A venture capitalist is a form of private equity that is provided at an early stage to an emerging firm that has a high potential for growth. You might have probably come across the term VC from Wall Street. A venture capitalist is a high-risk level of funding that aims at supporting a business with hopes of a high return on investment upon business maturity. The downside of venture capitalists is that they want their invested money to grow so quickly so that they can realize their return on investment. Venture capitalists are able to recoup their money during the initial public offering stage.
An angel investor is normally the opposite of venture capitalists. It is normally a wealthy person who is investing more in you as a person as compared to investing in a business. Angel investors use their own money instead of that of a venture capitalist and ensure that it is well managed. In return, an angel investor gets some ownership in the company in form of equity or some convertible bond.
You can get funding for your business through some small business loans. The bank works through evaluating your credit score and deciding on the amount of loan you deserve. The bank also reviews other issues such as your time in business and your business plan to make an estimate on what you are worthy. You will then be required to gradually pay back the loan plus interest. One of the main advantages of getting a business loan is that you will not be giving out any ownership of your company to anyone.