How To Raise Capital For A New Business

To Raise capital is probably the biggest obstacle many entrepreneurs face in starting a business. It’s both a serious problem and a popular excuse for many business-minded people.

If you ask ten random people why they haven’t turned their bright business idea into a real life business, eight of them will likely respond with the same answer: ‘I don’t have the capital…yet!’

Raising capital is never an easy task and often requires a lot of determination and patience.
There are a number of ways that an entrepreneur can raise capital for their small business, however, before using any capital collection methods, always remember to have a business plan to show to your investors. A business plan simply states the nature of the business, the objective, the mission statement, the business goals, costs, expenses, staff and everything business related.

Below are a few ways that a small business owner could raise capital for their business.

Keep in mind that should one method of capital collection fail, then another one should be tried.

Raise capital Starting with your savings

It only makes sense that you put your money where your mouth is. If your idea is as brilliant as you say it is, you should have no problem committing some of your own hard-earned money to it!

Using savings as a source of capital works best for people who already earn some form of income, no matter how little.

If you’re employed for example, you certainly earn an income from the salaries or wages you’re being paid. If you’re a student, it’s very likely that mummy, daddy and big brother often send you some pocket money.

Saving a reasonable part of any money you receive is a good start to raising the capital you need for your dream business.

Using your savings could also help to attract more capital.

It is usually easier to convince your friends, family, investors and banks to give you capital if you already have some of your own money invested in your idea or small business. It’s a sign of confidence and a show of faith that you believe the business idea is worth it.

Raise Capital from Friends

If you have gathered your savings and find you still need more money, these people are the next best source of capital for your business.

Your friends and family are people you have a strong influence over. They already like and care about you and want you to succeed. They are also willing to listen to your ideas and support you and will often be your first set of true fans and supporters.

Because they are emotionally connected to you, friends and family are willing to take a higher risk to invest in your business unlike banks and investors who consider risk very closely and seriously.

Try Crowdfunding

Crowdfunding (also known as crowd financing) is a new and fast spreading way of raising startup capital.

Instead of focusing on just a few people (banks, friends and partners), crowd financing allows you to raise small amounts of money from many people (a crowd) at the same time.

Although this practice has existed for a long time, the spread of the internet has taken crowd funding to a whole new level. It’s amazing at how much you can raise in a very short time with this method.

The way it works is simple.

You present your business idea or proposal to a ‘crowd’ by posting it on a website (see next paragraph for examples of the best crowdfunding platforms). Your proposal is supposed to convince potential investors and offer them a certain percentage of ownership in your business should they decide to invest.

Another version of crowd financing allows interested investors to offer you capital for which you will pay back with some interest

Raise Money from Banks

One great way of generating capital for a small business is to contact a bank for a loan. Most banks would be happy to provide a loan to an individual provided their credit rating and history is good. In addition, banks will also need to see the business plan and all expected expenses and sources of revenue before they provide the loan.
Once the loan has been provided, you must pay it back to the bank, with interest.

Ngo’s

NGO’s, or non-governmental-organization, are also very helpful in raising capital for a small business. Keep in mind that the NGO may not be able to provide financial assistance directly, however, they will able to guide you in the right direction to reliable sources of capital generation.

Despite the troubles appended to getting capital, one thing that is essential is to be consistent. Hence, as a entrepreneur, ensure that you don’t abandon your business. In this way, you should experiment with new things.

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