How to Raise Funds to Start a Business?by Emma L. Business consultant
Raising funds to start a business is something that can affect more than just the resources that you’ll have at your disposal. The methods that you use will determine your break-even point, the shareholder structure of your business and even some logistical issues that you’ll face. With that in mind, here are six options that you can consider when raising funds to start a business.
Friends and family members
One of the most common sources of funds is personal loans from friends and family members. In fact, as many as 38 percent of startups are funded this way. There are, however, a couple of problems with this fundraising method. First of all, your friends and relatives may not have this kind of money. Second, sometimes, people fail to take these loans seriously, which ends up deteriorating relationships that they took years to build. All in all, there are scenarios where this risk simply isn’t worth taking.
Personal savings and loans
According to one of the latest surveys, the majority of startups are funded from personal savings and loans. Keep in mind that pulling this off and exploiting this amazing opportunity takes some knowledge, which is why you might want to further educate yourself on the subject before you proceed. This is why finding a platform or an organization like Equiti Private Wealth that could help you learn a thing or two about strategies that will help you secure your financial future is important. The more you know, the easier it will become for you to use your own wealth to launch and grow your startup.
There are some companies that specialize in finding promising startups to invest in and, in this way, growing their own wealth. Still, in order to attract the interest of venture capitalists, you need to have something to show. Having a business model, a business plan and a prototype is a great start. Remember that in this field, there’s no room for bias, which is why you need to have something solid. Sure, sometimes developing a great prototype won’t be possible, yet, in these scenarios, you need to work hard to offer a suitable replacement.
The concept of an angel investor is the closest thing to the traditional business model where you come up with a business plan and then pitch an idea to someone with money. What confuses the majority of people is the difference between angel investors and venture capitalists. Simply put, angel investors are more likely to invest a large sum into a single business rather than spreading their investment funds over a number of promising opportunities. Therefore, pitching an idea to them might be a more profitable solution.
While it is true that only about 1.43 percent of startups are funded by banks and small business loans, the truth is that it’s still a viable option for all those who believe that they qualify. One thing that you need to prepare for in this field is the fact that even with all the paperwork, you might get rejected. Still, the number of options is quite vast, which is why you should never prepare your pitch to an audience of one.
Even though the concept of crowdfunding is relatively new, the truth is that it’s a simple and innovative way of financing your business. With the help of numerous online platforms, this task is getting easier than ever. Still, making it in the field of crowdfunding requires you to develop and hone certain skills. Remember that the audience of a crowdfunding platform isn’t as knowledgeable as investors are, which means that your presentation skills may make or break your attempts. After all, a guy with an idea of making a potato salad was able to gather over $55 thousand.
Finding a partner
Lastly, you don’t have to bear all the expenses of starting and running a business on your own. Instead, you can find a reliable partner to team up with. Keep in mind, however, that this has both positive and negative sides. On the one hand, you’re getting in touch with someone who can help you with the administrative tasks regarding your business. At the same time, you’re sacrificing some of the equity in your company, which, to a degree, also means losing control. This is why it’s vital that you find the right person to team up with.
The most important thing you need to understand about the above-listed tasks is the fact that you’re in no way restricted to just one of them. Combine these methods in order to raise sufficient funds and you might just provide yourself with a far more versatile business structure.
Created on Jun 10th 2019 05:39. Viewed 354 times.