Ways To Raise Start Up Capital
Updated: Mar 19
The following is an article “Ways To Raise Start Up Capital” by Marc Primo.
So you’ve got the perfect business idea and the only thing that is stopping you from making it happen is the capital you need to get it up and running. While this is the first stumbling block you will encounter as an entrepreneur, the good news is that you have several options to choose from depending on your requirements.
The following are three of the most common and effective methods used to raise funds for your start-up in the quickest possible time:
Take out a loan — Traditional financing products and services such as bank loans and credit card advances continue to be the method of choice for approximately 75% of new businesses, according to the Small Business Administration (SBA). SBA loans generally offer the most attractive rates and manageable terms for even the smallest business. To qualify, however, entails having to meet certain requirements that not all prospective entrepreneurs are capable of doing. For first time applicants, a typical requirement would be having 2 years experience or more with minimum annual revenues in the hundreds of thousands, which would automatically disqualify them from availing of lower rates. The next option would be to settle for products with higher interest until you succeed in meeting the standard credit and revenue requirements of SBA loans.
Pass the hat around — There is some truth to the adage about not mixing business with family and friends, but there are also exceptions to the rule. To avoid becoming a casualty of compromised relationships over money, it is vital that you pass the proverbial hat around to only a select group of family and friends with sufficient business acumen and also understand that there will always be risks involved. When managing their expectations, transparency is key and will determine how your business relationship develops should things go awry. Before signing on the dotted line, make sure that all bases are covered, from the form the investments will take down to the repayment schedule and interest rates, where applicable, to avoid misunderstandings later on.
Start a crowdfunding campaign — Similar to passing the hat around, crowdfunding essentially works on the same premise except via the Internet with like-minded individuals who you do not necessarily know personally but share the same vision as you. While you might have the time to set the groundwork for the business, they do not but instead bring to the table funds that collectively add up to finance your start-up. Successful crowdfunding pitches typically include a strong and compelling presentation that highlights the value proposition of your business idea, evidence that there is a need for it, and a convincing reason justifying why you require financial support. Crowdfunding sites like Kickstarter and Indiegogo are a good place to start if you decide to take this route.