You had that brilliant business idea for months now. You have been planning a lot recently, drawing sketches and working out various aspects of the new venture. You are very sure that this new product or service will sell and attract huge patronage. Being an entrepreneur is really exciting - you say. But then, you have one big issue to worry about - how do I get the capital needed to kick this new venture off and get it running?
Securing the capital needed to start a new business is not such an easy thing, especially when you live in certain parts of the world were access to funds is very limited. You are not supposed to ditch that beautiful idea you have been working on. So in this article, I will share with you 5 ways you can easily raise capital for your new business. Lets get into it
5 Major Sources of Startup Capital
1. Savings/Assets: This is usually a great place to start, which will also indicate that you are really committed to the business. An entrepreneur should have some savings which would be the first point of call. Starting a business does not happen overnight. It calls for long-term planning. Within this time, the founder of the business should also be keeping something aside so that when it is time to launch, they will deep hands into their pocket and make funds available. Having some savings give the entrepreneur a very good foundation to build on, before looking for other sources of funding.
Sometimes though, an entrepreneur may not have reasonable savings, but might have valuables that can be disposed to raise funds. For example, the entrepreneur might have land, machinery or house that can be really pricey. In this case, these valuables can be sold to raise funds for the new business. So whether it is from personal savings or assets, start-up capital can be sourced from within - the entrepreneur. Most times though, the funds provided through savings and assets are not enough. So the entrepreneur can check another way to raise funds - Family and Friends.
2. Family and Friends: Charity - the say - begins from home. And there is no place like home. Sentiments like these speak highly of the close connection felt between people from the same family. When you are looking for start-up capital and your savings is not enough, the family can be a great place to look. Your mother, father, brothers, sisters, even extended family members, may be willing to support your new business. So why not approach any of them and see if things can work out from their side.
Most times, its great to explain the condition of the funds you are looking for. Family members might wrongly believe that their money given to you is like an investment that will not generate any returns. So when approaching them with your business idea, explain that you wish to return the money at a specific time in the future. A good business plan presented to them should explain how you plan to invest the money and when you plan to return it.
If you have built great personal relationship with friends, they can be a source of capital for startup too. So you could think about one or two friends that would be willing to give you some free money or even loan for your new business. Again, you have to take a business approach especially when you are expecting huge funds from your friends. Show them your business plan, explain everything in detail. You might be surprised that your friends will be interested to release funds to you. Beyond savings, family and friends, you could look at other smart ways to raise start-up funds such as Partnerships.
3. Partnerships: Two is better than one, is it not? Well if you think you cannot do it all by yourself, then why not look for someone that will join the business as a partner. Partnerships have helped lots of business not to go under. Your co-founder may or many not be involved in actively running the new startup. Whichever way, it would be far more easier to generate start-up funds by two persons or more instead of you alone. What is needed if for all parties to understand and agree on how much stake they will have in the new business. Appropriate agreement documents can be signed and the funds made available. If you partner with the right person or persons, the business will grow and thrive because funds would always be raised easily by more persons than one.
4. Bank Loans: Depending on where you live, obtaining bank loans may not always be easy. However, it remains a big avenue to raise funds for your Start-up. Banks would require a higher level of commitment before they release money for you. One reason getting bank loans for businesses is not so easy, is because they will require collaterals. Sometimes too, their interest rate is much higher that a start-up may not find it sustainable. Whatever is the case, with the right strategies and business documentation, it might be possible to obtain loans from a bank for your start-up. My suggestion is that bank loans should not be the first point of call.
5. Crowdfunding: This is a modern and easier way to get funds for your start-up. Individuals in a social setting have been able to fund the launching of new ventures in a stress-free manner. It is much easier for a group of people to pull resources together and sponsor a particular project - especially a new business. There are many crowdfunding programs both online and in your local community that you can explore for funding opportunities. One of them available online is Kickstarter. There are many more crowdfunding programs available. I will explore them in my next publication. But then, it is important to explore crowdfunding as an avenue to raise funds for your new business
Launching a new business might be tricky if sufficient funding is not available. So as an entrepreneur, you need to make a proper financial plan before you kickoff. I have highlighted just 5 ways to source start-up capital, but is obviously more ways. So a little more research would help you explore other opportunities.
I hope this article will help you to succeed as you work hard to launch that exciting business idea you have been working on.