Very few people know how to raise capital for their business, especially if it is their first startup. Though a necessary part of the process, investing your own money may not be enough. How can you raise capital for your business, and where can you get it?
1. Create a solid plan
Your business won’t be successful without a solid plan in place. Without one, you won’t be able to secure capital to get on your feet.
“Every successful business transaction starts with a carefully developed plan,” Jeffrey Hayzlett writes in a September 2017 article for Entrepreneur.
Hayzlett says that a good plan should identify the problem your business is trying to solve. It highlights the unique features that make your service or product stand out. Use these to build a short pitch. You should identify future milestones and then estimate how much capital you will need to meet them.
Without a solid plan, potential investors won’t have any reason to believe they can trust you and your business with their funding.
2. Friends and family
Borrowing money from friends or family is one of the most common ways to raise capital for a new small business. However, many investors shy away from it. After all, the potential cost of failure isn’t just financial; it’s personal. The key is to present your pitch professionally and treat your friends and family like real investors. This will make things go more smoothly if you are turned down.
On the upside, that personal relationship can take you further than you could go with an unfamiliar investor.
3. Crowdfunding
Crowdfunding is an increasingly popular way for small businesses to raise capital money to get started. Websites like Kickstarter and GoFundMe let you solicit funds through online campaigns. In return for their money, donors receive services or products related to the project you are trying to launch. The value of which is based on the amount donated.
4. Angel investors
Angel investors are individuals with deep pockets who will invest in your startup in exchange for a higher rate of return than traditional investors.
Companies like Google and Yahoo, received help from angel investors in their early stages. “The big advantage is that financing from angel investment is much less risky than debt financing,” Susan Ward writes in an October 2018 article for TheBalance’s Small Business. “And, most angel investors understand business and take a long-term view.” You can find angel investors on websites like New York Angel and Angel List.
These are some of the ways you can raise capital for your business. Others include credit card loans, personal business loans, SBA loans and microloans from nonprofits. Talk with a professional to explore all of your options.