Raising Capital: 7 Ways to Raise Capital For a Startup

Raising Capital
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Money has always been the life wire for starting up a business but it has always been a difficult task in sourcing for it. Although it requires a little patience and determination. However, Except you’re a beneficiary to any outstanding possessions, you would hardly ask or find out how to raise capital for a business startup. Moreover, If you are seeking how to raise capital for a business startup, you are not alone. This article is intended to equip startup entrepreneur with the processes of raising capital for businesses and real estate.

Raising Capital for Business

Capital raising is when an individual has the ability to obtain startup funds in order to get the business get started or probably for real estate. Capital is an invariably determinant of the success and growth of any business. In this case, an idea is useless if you cannot raise capital to transpose it into a certainty. Therefore, a business is practically difficult to start without capital.

While there are lots of places and where to raise capital, taking the right sources is the most significant step to employ.

Read Also:Financial Capital: Overview, Sources, Examples, Types (+ free tips)

raising capital
Image Credit: DataDrivenInvestor(Raising Capital)

However, some business individuals regard raising capital to be weighty, because it is hard to get and thus requires patience. Below are how you can raise capital for your business startup.

  1. Personal Savings
  2. Families and Friends
  3. Research and Pitch for Grants
  4. Source and apply for Investment from Venture capital firms

Read down through this article, you will discover more salient methods and skills of raising capital.

Raising Capital for Real Estate

A real estate business is concerned with buying, selling, management, or investing of real estate properties. Real estate is one of the investment opportunities for individuals wishing to achieve financial freedom. Unlike every other kind of business, it also requires raising capital. All you need is to ignite with the right source of raising capitals to get started.

In real estate, it does not necessarily mean that money must come out of your pouch but through OPM, you can possibly raise capital or invest in real estate with the help of other people’s money.

Moreover, you can raise capitals for a real estate through:

  1. Hard Money Lenders
  2. Traditional Investment Property Financing from a Bank.
  3. FHA Investment Loan
  4. Peer-to-Peer Loan
  5. Private Money Lenders
  6. Wholesaling Real Estate
  7. Private Money Lenders

7 Ways to Raise Capital For a Startup

As mentioned above, one challenge of building a successful small business is raising capital to get started. A vast number of new business ventures have failed due to lack of capital. The most important questions have always been; How much do I need, and where should I get started with capital. Worry your head no more. I’ve got you detailed answers to these questions.

#1. Self-funding/Bootstrapping

This is an effective way in raising capital for a small business, especially for first-time entrepreneurs who have trouble finding other sources of capital. This fund is gotten from personal savings. Self-funding a business is never for a fainty heart. It usually takes years for these entrepreneurs to get off the ground. This requires creativity and a lot of strategies in order to keep their businesses going.

#2. Friends and family

Borrowing money from friends and family is another way of raising capital for a small business. Although there are risks associated with it. If you decide to borrow money from a friend or family member, we advise that you avoid shortcuts. You should thoroughly create a formal loan agreement for the loans unless it was a free-will gift upon request. Your agreement should list the interest rate and payment schedule. Trust me! there will be no misunderstandings over when you’ll have to refund the money.

#3. Small business loans

You’ve got business ideas, then, unfortunately, there is no enough funds to start up. Consider short term loans for business as your next option. You can actually raise capital from here

You can possibly increase your chances of securing a loan, with a business plan, expense sheet, and financial projections for a fixed period of years. Once you have your materials ready, contact banks and credit unions and request a loan. Meanwhile why requesting for any loan, try to figure out which terms and loan plans favours you. SBA loans are backed by the federal government and offer more flexible repayment terms than standard bank loans.

#4. Crowdfunding

Crowdfunding is a system of funding a project or venture by raising capitals from a large number of people, typically via the Internet. It is also a form of crowdsourcing and alternative finance. Over the years crowdfunding sites such as Kickstarter have become a popular source of capital for many small businesses. A crowdfunding campaign can also be a better way to gauge interest and increase marketing hum about your business. Most crowdfunding platforms operate differently from others. Therefore be sure you understand the rules of your chosen platform before opting for it.

#5. Angel investors

Angel investors are individual investors who always seek to invest their own funds into new businesses, mostly in exchange for assets. By definition, angel investors are often credit individuals with a net worth of about $2 million or an annual income of more than $150,000. Typically, they operate alone but sometimes, they may team up with other angel investors and form a fund.

These investors tend to be successful business people themselves, and one of the advantages they can bring is an experience in your chosen industry as well as potentially valuable contacts. Generally speaking, angel investors are a popular route for tech startups and other businesses looking for funding at a level higher than most friends and family can support but lower than most venture capital firms. If you decide to seek angel investment, you’ll want to be clear about what you desire from your new partners.

#6. Startup accelerators

An added route for new startups is through incubators and accelerators. These are organizations that are dedicated to helping entrepreneurs develop their businesses while also connecting them to potential instructors and investors. In startup incubators and accelerators, the intended entrepreneurs apply to join a class of other small businesses and then go passes through a rigorous process of developing and setting their business idea. The startup accelerators application process are often lengthy and competing. Therefore make sure you’ve got a solid business strategy and a strong ball ready before you utilise it.

#7. Venture capital

Venture capital financing is private funding given to companies and entrepreneurs with long term growth potentials. Generally, they come from well-off investors, investment banks, and any other financial institutions. It emerged from a cubbyhole activity at the end of the Second World War into the modern industry with versatile players that have added an important role in encouraging modernisation.

Read Also: GRANTS FOR BLACK BUSINESS OWNERS: 13+Best Options Available in 2022 (updated)

Capital Raising Process

A capital raising process is an essential roadmap for how your organization will seek and obtain the funds to fuel its increase. Meanwhile, Equity financing is the process of raising capital through the sale of shares. The capital raising process can take a long time and it’s a serious undertaking.

Another process is when the management of the company or an entrepreneur goes public with investment bankers to meet institutional investors that are hopefully going to invest in their business. This roadshow is a great opportunity for management to persuade investors of the intensity of their business during the capital raising process. Below are few capital raising process.

  • Choose a funding Type
  • Determine the Capital Needed
  • Valuation of Pre and Post Money
  • Meeting with Investors

Conclusion

Finally, an entrepreneur may raise capital just a few times throughout his/her lifetime. Angel investors can be a good source of capital for your business. Remember, you must have a solid business plan put together and a great tone. Try to capture their attention with interest and promising details about your company

  1. HOW TO ATTRACT INVESTORS TO YOUR BUSINESS [Mastery Guide]
  2. How to raise price and still win the market
  3. Savannah Funds for Tech Startups in Africa

Hence pieces of information contained herein are only for informational purpose. If you find it difficult to achieve your goals in businesses, you can bridge the gap by contacting advice from mentors, attorneys and other advisors who are experts in counselling companies and entrepreneurs in raising capital.

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  1. Working capital is important for the long term success of the company. Thank you for sharing an wonderful post.

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