Every small and big business survives because of that initial investment. It is relevant to say that capital is the fuel that drives the business and contributes to the majority of its success. However, it requires a great business idea, strong power of convincing, and the right resources to get the funding. Raising capital is quite intimidating during the starting phase of the business, however with time, you get the notion of doing it well. Also, it becomes easier to get the attention post establishment of your business. The funding solutions give you the edge over your competitors, and you get to take full advantage of market opportunities. So what are some of the effective strategies to raise capital as a small business owner?
When you have a feasible business plan that requires small startup capital, you can chip in a part of your savings to grow your business. It is always convenient to put in the seed money from your personal finance or seek help from immediate family and friends. You must analyze this option before freezing it because there are risks involved. Assess the possibilities of owning a business card that lets you borrow money with zero interest.
When you have a solid idea and plan the process of its execution seriously, you can easily have a family member or friend believe in you. Share that conviction and discuss the funding amount, risks, and repayment plan. One of the vital things to do is document their contribution and ensure a process to manage the loan efficiently.
Crowdfunding allows you to be innovative while you showcase the probable outcome of your business idea. With the right pitch, you can attract a good crowd who believe in your vision and fund it to help expand your business. How is that possible? Basically, you share the product or service idea through an intriguing video, talk about the business goals, the funding amount you need, etc. Thereby you have to share it with as many people as possible and get their interest.
All you need to know about crowdfunding is that the platform assures two-way assistance, i.e., financing and marketing. As people fund the business, they take pledges to prebuy the product or give a donation. Crowdfunding attracts investment from the common public early on instead of the professional investors who may pitch in later(if they see growth). Since the platform is extremely competitive, ensure your business idea is absolutely firm and valuable. Example: Formlabs, a maker of 3D printers, raised $3mn on Kickstarter. Another firm, Mate X, a foldable eBike maker, raised about $17.5 mn on Indiegogo. Some of the famous crowd platforms are Onevest, GoFundMe.
Approaching a bank for a loan is one of the steps involved in fundraising. There are many criteria to choose from as you go about exploring this option. Ensure having a good credit score, prepare the documents necessary to get a loan. You can opt for a personal loan, business credit card, or business lines of credit. Lenders need all your important documents in place, business plan, valuation, and project report. They will also verify if you will authentically honor the repayment terms.
Apart from your personal information, you may have to share a copy of your business profit and loss statement, balance sheet, credit, and bank statements.
Angel investors are individuals who work alone or in teams to source funds for potential startups. They have an annual income of about $200,000 and invest in exchange for equity ownership in the startup. The best part about them is they see value in a startup company, and with a solid business idea, you can easily get their enthusiasm to mentor you, invest in your idea, and ensure growth. The investment could be a one-time payment or subsequent financing in the early stages of the startup. It is your business proposal that draws them, and they become an advisor for your startup. Check out the Angel Capital Association to meet and seek investors, ensuring the future potential for your business.
With an upper hand over the business operation, venture capitalists look for scalable companies that have proven themselves. Small businesses with potential who have grown in a short time with innovative plans make profitable use of venture capital deals. Venture capitalists become middle-level investors who stand between the angel investors and the IPO funding. They exercise more control over the business since their contribution is much more than the angel investors. You can rely on them for advice and look up to their expertise. However, remember to have numbers and financials ready as you prepare to pitch to the VC firms.
Sometimes startup owners have no records of credit ratings or may not otherwise qualify for a bank loan. In such times, Non-Banking Financial Corporations (NBFCs) come to their rescue and provide finance and other banking services without any legal documentation or obligations. You can always rely on NBFCs for the initial rounds of startup funding series. Because of no banking license, NBFCs ensure you get a loan at comparatively lower interest rates, one of the safest places to seek funds if no other option works out. But as always, make a strong business proposal.
The pandemic impacted all businesses and startups alike. With regards to this, the government has initiated many grants for different causes. There are some qualifying factors for businesses, but small businesses, nonprofit organizations, and educational institutions are sure to benefit. Health grants, innovation research programs, technology transfer programs, etc., are some of the programs that give grants if you qualify for them. These grants help businesses grow, expand or conduct research and development. The best part is they do not need to be repaid and have no connection with your credit rating. Based on your location and industry, you can look at the many grants available and assess which one you would qualify for. The laws are strict, so play by rules once you get a grant to avoid paying the penalty.
To raise capital as a small business owner is a challenge, but it gives you wings to materialize your dream. Once you kick off the ground level, how much capital should you raise in your future investment round is your choice looking at the business's success. SO, early on, you must refine that idea, and before pitching it in, analyze and know the value of your business. Will it make a difference to people, and how? When you can visualize your startup's success and convince investors of its potential future, funding will only be a formality to do.
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A believer of good things and pursuer of diverse avocation, she is a fiction lover and a simple writer. Supriti has a number of professions to her list and she feels challenges are the only answers to failures.