Entrepreneur’s Guide For Raising Funds To Kick Start A New Business
Ram Tumuluri “Obtaining funding may seem overwhelming at first, whether you are searching for start-up funds, or to expand your current business or a start up. No single funding source is inherently easier to get by than another and if you’re serious about starting a business you need to be prepared to hussle. Securing funding often depends on your business model, on your estimates, forecast, planning, business plan and often your personality and personal drive to succeed. When it comes to winning over an investor or securing funding from a business loan, how well you can appeal to potential financial investors matters. In this article, our team outlines several different options available for raising finances for new businesses and startups.”
How to raise funds to start new businesses
In this article
- Personal Savings
- Apply for a small business loan
- A loan from family members
- Small business grants
- Bootstrapping your business
- Angel investing
- Crowd-funding for fundraising
- Getting a cash advance
- Venture Capital funding
- Peer-to-peer (P2P) lending
Start Your Business By Investing Personal Savings
Having your own financial savings can be a good alternative, as it means you don’t rely on money from someone else. That way you won’t have any debt and don’t need to give creditors any equity. Using your own cash is not only common, but it also shows a business owner’s loyalty to other potential investors who can potentially help third parties gain additional capital. Maybe you own land, bonds, stocks or valuable family inheritances that you’re willing to sell to raise cash to finance your company. Selling cash assets is a time-tested method of raising capital, but there may be tax consequences associated with selling those properties, specifically real estate and stocks.
Apply for a Small Business Loan to Kick Start Your New Business
Obtaining a loan can be a simple and clear way of getting the money that your company requires. Small business loans work the same as personal loans, with annual or monthly repayments over the lending term at a fixed interest rate. Small business loans can be perfect for businesses that receive a steady income each month. A simple way to see how much you should borrow would be through a marketplace, where you can browse the market for the different funding opportunities to which you are entitled.
UK Bank Business Loans
If you’re not sure who you want to bank with it can be a good idea to also look at comparison websites for business loans.
You Could Find Investors Within Your Family or Friend Groups
A popular alternative is to borrow from a personal friend or family member. It can be easier to persuade family members and associates than anonymous bank officials. They are much more likely to look beyond the current account balances and credit score when deciding whether the cost of extending a loan is worthwhile. They are less likely to demand strict repayment terms, so you may avoid high-interest rates from family members. When borrowing from someone close to you make sure that you have specifically written down all the terms of the loans. That includes how much to borrow, the amount of interest paid and the repayment schedule.
Search Online or at Your Local Council for a Small Business Grants
A Business Grant is a scheme that gives small business owners and entrepreneurs funding or resources. Nonprofit organizations and state or local governments often provide grants directly to small businesses for economic growth. Check with local and state governments for possibilities for local grants. To qualify for a small-business grant, your company will need to follow certain requirements, such as operating in a specific industry or venue.
Bootstrapping your Business
Bootstrapping is establishing a business from scratch with nothing but personal savings, time and your own personal skills. With luck, hard work and solid entrepreneurial skills you’ll raise the cash you need from direct sales. This could be a good option for you if you don’t need to hire employees, the business doesn’t require stocks or you have the skills to create websites to launch an online business. Bootstrapping may not be the quickest way to your business, but it is one of the most risk-free ones.
If You’re Launching Business With Scalability Angel Investors Could Be Your Key to Success
An Angel Investor is typically a high net worth person who initially funds startups, often with their own capital. Angel investing is also the main funding source for many startups who find it more appealing than other forms of financing. Angel investors can also help provide cash to get the company through some troublesome early stages. Developing your network of investors can be a very useful skill. There are plenty of sites online where angel investors can be found but here are a few of the best places;
Crowd-funding is when large numbers of people contribute a small sum to a product or business concept. It leverages large networks of people to put together investors and entrepreneurs through social media and crowd-funding websites. A successful crowd-funding campaign can be great in helping to build momentum around your idea and making more people aware of your company.
Getting a Cash Advance
A cash advance for business is when a company provides a business with cash in advance (usually until they collect any invoices and debts) For example, if you run a store, the organization that helps you financially will buy, at a discount, a fixed percentage of your potential card machine purchases. They will then move a lump sum to your account, allowing you to buy equipment or stock. They will then take a prearranged percentage of any transaction you make, usually about 10-20 percent. This alternative can be less daunting than a bank loan because you just have to pay your lender back when a buyer pays you. Keep in mind that certain businesses will need you to take about £2,500 in card purchases a month.
Venture Capital Funding
Venture Capital is a type of funding given by investors to startups and small businesses that are considered to have long-term growth potential. Venture capital funds invest either on behalf of an investment group or private investors. They usually have different fields in which they invest, depending on their style of management. Venture capital investment need not always be money. They could also be in the form of managerial or technological contributions.
Peer-to-Peer (P2P) Lending
Peer-to-peer lending has gained popularity as an alternative source of financing. Peer-to-peer loans can also be used to fund small companies and start-ups. This form of credit also has very flexible terms and some companies do not charge early termination fees and offer customized rates that do not impact your credit score.