It is easier to get a hold on a good business idea. But, the common setback for most potential entrepreneurs is to know the right ways to raise capital for the business. Consequently, most great business ideas die and get buried without seeing the light of the next day because of lack of funding.
Therefore, it is OK to beg for assistance, it also right to borrow money from banks and it is not a crime to seek for grants or empowerments from the government. But, it is wrong if you do nothing and let a beautiful idea waste because of shame or fear.
Though, it feels normal to be scared about the outcome of the business, or how you will pay if the business didn’t pull through. However, risk is one of the core values of entrepreneurship and over thinking or waiting for the right time is one of the mistakes starters make when trying to Start a business.
Therefore, get a vivid idea of what you want to do, do the market survey and research, draw a business plan, discuss the business with 5 trusted person and start looking for a way to start raising the capital.
Read more: How To Start A Small Business With Ease.
10 ways to raise capital for business
Below are different ways to look for money to start your business. Though, the list is not a comprehensive one, but it is a proven and effective ways you can source for fund for your business.
1. Personal savings
Every business have a planning stage where you put down things you need to start the business and how you intend to run it successfully. In that sense, no business is borne overnight. So, your savings as well should actually show that you really planned the business.
Therefore, you cannot claim to have a very brilliant business idea that you cannot bet on through investing. In other words, you will have to at least show what you have achieved against what you are to achieve when soliciting for support from investors or even banks.
In addition, it is easier to get a loan from financial institutions when you are borrowing as a business and not an individual. Meaning that, before you run for financial help, make sure that your business already have a location, legal documents, business registrations and also one or two functions that will convince investors that their money is safe with you.
These you can start with your personal savings first.
2. Take an odd job
If maybe your savings is not enough to start your dream business, you will have to look for a way to at least make it reach up to 40% of what you need. One of the effective ways to do that is to take a job as a side hustle to supplement your earning.
However, most times it may be challenging to choose an odd job that may fit to your lifestyle or personality. But, remember you are not doing it for fun but for the money and the dream ahead- let that be your motivation.
Thebalancecareers made a list of 15 odd jobs one can do to get extra cash which includes; delivery driver, household helper, customer care representative etc. Nevertheless, There are also online business opportunities to make money that can serve as side jobs for the purpose of raising funds for your business such as; Dropshipping, Freelancing, Affiliate marketing, Blogging etc.
Whichever media (Offline or Online) you choose, the goal or endpoint is to hustle to earn extra money that will facilitate the opening of your business.
3. Try Partnership
According to lumenlearning, Partnership contributes to about 10% of all the Forms of business organizations found in US, making it the second most common type of business while Sole proprietorship takes about 72% of the population.
Therefore, when you cannot start up your dream business due to financial constraint, it is better to look for someone to share the dreams rather letting it go down the drain. Though, People are always skeptical about entering a partnership business because of the downsides of it. On the other hand, there are also so many reasons to consider looking for a partner especially the part of raising the fund or sharing the risk with someone.
Aside from that, two or more correct heads they say are better than one. So, partnership gives room for brainstorming and concerted effort to building the business which will save you some money in the start up process.
4. Seek assistance from family and friends
It is not a crime to ask family and friends to help you with capital to start a business. In fact, it is one of the safest and easiest way to raise capital for your business because their funding does not always come with attached interest nor collateral. This is because they already care about you and will want you to succeed, so, investing their money to your proposed business will not be that challenging to them.
Again, there is flexibility of payment unlike the commercial bank system where you are bound by law to pay at a stipulated period of time. In addition, family and friends can easily understand and give you time to figure things out if the business is not going the way you planned.
However, according to Pocketsense, loans from family and friends most times can lead to strained relationships. At some points, because you are in debt to a family member or friend, they may feel they have the right to control the things you do including your lifestyle and spending habits. Some will go to the length of wanting to inspect your banking information and your expenditures including your wardrobes.
All said and done, it is still the best and most reliable way of getting capital to start your business just that you will have to be ready for family drama – which is not totally bad.
5. Start a Pre sale
Pre sale is one the creative method of raising money to start a business. This entails making profits from purchases made before your product or service is actually publicly available.
Creating an outstanding product is one thing while getting people to know about it is an entirely different ball game. Presale serves this purpose as well as helping you raise funds to support the business. One of the advantage of presale is that it creates awareness about what you do. Not only that, presale also helps you to determine your marketing target, Build your first loyal customers, ascertain the acceptability of your products and get reviews/feedbacks on how to improve.
Therefore, it is important to have your presale well planned in order to meet your advertisement goal as well as the fundraising goal.
However, making money to support your business is part of the goals but, focus more on the utility or value of the product or services you are rendering rather than instant profit.
6. Sell off assets to raise capital
An asset is an item or property that is owned by an individual or company that have value to meet debts, commitments, or legacies. In other words, they are properties you possess that can be used for exchange of money in the market such as jewelries, cars, houses, lands etc.
Its pretty obvious that this method of raising capital for business is always challenging to so many entrepreneurs because of the emotional attachments we have for those items. It maybe a piece of watch from your grandfather, a jewelry that reminds you of your mom or a piece of land you inherited from your family.
In any case, you will have to be meticulous with choosing between the business and your assets. If your business turns out good – which we hope does, you can get yourself bigger and better properties.
7. Seek for Angel Investors
Angel investors invest in early stage or start-up companies in exchange for an equity ownership interest. However, Angel investors are not really “angels” that will go about dashing money out to anybody wanting to start a business. In other words, they are business people looking for business with potential that can bring them interest on the long run.
Therefore, you have to convince them to take that leap of faith with your business. If you want to increase your chances of catching the attention of an investor, then you must pay close attention to the quality, content, and presentation of the information you give to investors. These information includes; well structured business proposals, business plans, slide decks, information memoranda, and concept notes. Shabby works or poor documentation is one of the major reason why investors ignore so many business proposals.
In addition, you have to try to add value to your business in a way that will capture your investor’s attention. You have to give them reasons why your product is worth risking their money.
Finally, the method and medium of pitching your business idea to an investor is also very important. In that regards, seek for the right time, right place and right communication method.
8. Apply for Grants
A grant is money given to someone by a government or organization as a way of supporting their pursuit. Unlike Loans, you are not to pay back grants given to you for your business. However, grants are competitive and requires your business meet some eligibility criteria.
Therefore, when considering this option of raising fund for your business, you must make sure that you have a good paper work of your business plan.
There are so many programs designed by the government of different countries for the purpose of providing capital for small businesses.
In US, the Small Business Administration (SBA) which was founded in 1953 is to help Americans start, build, and grow businesses, whereas, in Nigeria, there are so many federal government grants such as the National Youth Investment Fund (NYIF) and Africa’s Young Entrepreneur Empowerment Nigeria (AYEEN).
Other organizations and NGO’s in different countries also offer grants to people who wish to start a small business and lacks the fund or capital.
9. Get a Bank Loan
One other way to raise capital for business is going to the bank for loan. But before you venture into that, make sure you understand what it entails, the pros and cons as well.
A bank Loan is when a bank offers to lend money to a business or individual for a stipulated period of time while receiving a certain amount of interest monthly or yearly as interest.
Therefore, banks do not give out loans to anybody that walks in the bank for it. They will need to ascertain that the business is capable to repay back the money with the accrued interest within the stipulated period of time.
In that regards, banks tend to give out loans to established businesses easily more than new business. This is because, the established businesses have higher propensity to pay back than a business that is still to start. It does not still mean that small businesses cannot get a loan from the bank.
Hence, to increase your chances of being worthy of a loan from a bank. You must do anything possible to prove to them that your business is credible and has the potential to pay back. You can do this through an organized provision of business documents, road maps and plan.
Usually, banks ask for collaterals or guarantors as a security for the loan they give you in case the business fails. So, what happens when you fail to pay at the agreed time?
The risk is that you will loose your property you placed as collateral which most times is worth more than the money borrowed.
Therefore, you have to weigh all the Pros and Cons before choosing bank loan as a method to raise capital for business.
10. Start crowd funding
This is another strategy individuals utilize to raise capital for business start up. In Crowdfunding, a group of people usually online-based, try to lend different amount of money to you for your business.
There are many ways the crowdfunding works which includes;
investment-based crowdfunding – people invest in your business for a stake in return
loan-based crowdfunding – money is lent to your business at a set interest rate, also known as peer-to-peer or peer-to-business lending
reward-based crowdfunding – you give a reward in return for someone’s investment, usually linked to the project you’re promoting
donation-based crowdfunding – people donate to your charity or cause, sometimes for something promised in return
In whichever way, the process is similar; you will have to provide a convincing or interesting business idea or proposal to the website that will attract investors or donors to your business.
There are many popular websites where you can present your business idea for crowdfunding. They includes;
There is no perfect way to raise capital or fund for business that has no down sides or challenges. The key note to take home is that good business idea with a proper business plan and documents is a tool to attract investors, donors and loaners to your business.
These 10 Different Ways To Raise Capital For Your Dream Business are proven to be effective if properly followed.
If you like this post, you can subscribe to our subscribers list for more or help us click on the share button for others to see as well.