5 ways to raise capital for your business
Photo by maitree rimthong
The challenge of sourcing funds can be daunting for many startups. This is because business capital can make the difference between a failed startup and a successful one. Fortunately, there are different ways to generate capital for your business. If you need external funding, understand that you are not alone. According to one study by the Small Business Administration, more than half of businesses applied for loans in 2020. That’s a huge number of entrepreneurs seeking assistance. Check out these tips to raise capital for your business.
1. Start a crowdfunding campaign
Crowdfunding can allow you to create connections with like-minded individuals who want to support your business. There are several crowdfunding success stories like Formlabs, which raised millions on Kickstarter to achieve their goal of manufacturing cost-effective 3D printers. You can gauge people’s interest in your products and identify what resonates with customers through crowdfunding. Serial entrepreneur Nathan Resnick stresses that starting a successful crowding campaign requires a great story. Members of crowdfunding websites like GoFundMe, Kickstarter, and Indiegogo usually want to know whether you can transform your dreams into a reality. Your video pitch should highlight your product’s value, the problem it solves, and why you need financial support. Apart from that, having a professional website and PR outreach can improve your chances of running a successful crowdfunding campaign.
2. Look for an angel investor
Angel investors are wealthy and accredited people who operate alone but may also team up with other investors to create a fund. They can be a great way to seek capital for your business. It is important to develop a solid business plan and write a great pitch. You may be able to win the attention of angel investors with enthusiasm and factual data points about your potential. Are you wondering where to find angel investors? Many resources exist. For example, the Angel Capital Association is a good platform to meet and showcase pitches to wealthy investors.
3. Get in touch with venture capitalists
Venture capitalists mostly invest in more established businesses than angel investors and sometimes want to participate in the day-to-day operations of a company. They fund scalable and cash-positive brands with proven products. That is because some VCs have a responsibility to get returns for the firm. You can apply for funding from a VC firm if your business satisfies their requirements. While this is not the easiest thing to do, several businesses have done it. Your pitch basically determines your funding chances. Successful VC firms like Sequoia encourage businesses to convey the ultimate reason why an investor should fund your business in the first few minutes. You can do this by explaining pressing problems that present a significant opportunity for your company. Finally, prove how your company can capitalize on the opportunity and get into the details of your business’ financials. A real estate syndication is also a great way to generate capital to acquire and operate real estate if this is your chosen niche. You can check out this article on 12 ways you can earn money as a real estate syndicator.
4. Apply for a loan
A little cash comes in handy regardless of whether you run a start-up or an established firm. Banking institutions can provide you with substantial financial backing if you have a good business plan. One way to obtain funds for your business is through a small business startup loan. Loan terms may be favorable, provided you have good credit. Businesses that participate in international trade may find it easier to access a loan. The requirements often differ from one lender to another. You may have to provide financial information such as tax returns, profit and loss statements, and balance sheets. It helps to understand how financial institutions will evaluate your loan before you apply. Some banks may focus on how long you have been in business, while others may look at cash flow and collateral. Banking with a major lender will make getting a loan approval easier.
5. Bootstrap your business
Bootstrapping means building your business with limited finances without external support. You can boost your chances of success by ensuring a low cash burn rate. Bootstrapping reduces financial burden since there are no debt repayment obligations involved, which means high flexibility. It is easier when you have a business that can generate immediate returns. Investors will come knocking at your door when you use your own money to build a successful business, so feel free to consider this.
