5 Strategies to Raise Capital for a Small Business
In order to put up a small business that has a great chance of flourishing financially, you have to design a solid financial foundation for your business plan. Fortunately for financially-strapped entrepreneurs, there are some basic strategies you can take advantage of in order to raise capital for a new or current business venture, even if your bank account is not loaded with money. Consider these options for funding purposes:
1. Using personal financing.
If your personal bank account does happen to be stocked with a reasonable amount of money, think about if you can use some of it to go toward your small business. In many cases, you’ll have to use at least some of the money you already have for the startup phase to get your company off the ground. Entrepreneurs obviously have the most control over this strategy versus others, so take full advantage of any money you have saved up that is in your hands. Also, mention your business plan to family, friends, acquaintances, and others who may be willing to help you financially in some fashion, even if they simply loan you a little money that you can pay back to them later.
RELATED: Pros and Cons of Financing a Business
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2. Explore small business equity.
Funding through business equity is available when a new business owner obtains a certain amount of capital in exchange for an equity ownership stake in the business at-hand. Angel investors, venture capitalists, and institutional investors often represent those who are involved in providing equity funding to entrepreneurs and startup ventures. To receive this type of financing for a company, small business owners should have a viable business plan and good credit. A business plan should project substantial profit potential and a large return on investment (ROI).
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3. Consider getting a small business loan.
Whether a new business needs funding to get going, or an established small business needs a bit of a financial injection, there are several ways to acquire a small business loan. The most traditional method is to obtain a bank loan, which involves getting money that can be paid off over time. Microloans are another great option to consider because they typically range from less than $1,000 to up to $100,000. Good profit projections that are supported by detailed research and data are necessary for getting a business loan and getting it approved. This is why loan applications that indicate low equity, high debt, or unsupported profit projections are much less likely to meet the standards for approval.
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- Thinking of Getting a Bank Loan? Do Your Homework First!
- 12 Tips for Getting Your Bank Loan Approved
4. Check into government funding/grants.
The government can offer a reasonable amount of funding opportunities for newly-established businesses. Government funding can be acquired in various forms. From grants for nonprofits to loans from the Small Business Administration at the federal level, it’s definitely worth seeing what kinds of government funding are at your disposal. It is also important to look at these options at all levels of government, including local county offices, state agencies, and federal business-supporting agencies. As you’d expect, the government generally funds viable business plans with good future projections. As such, grant applications have to be persuasive enough to acquire this funding.
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5. Consider using a crowdfunding platform.
One of the more recently developed and popular capital-raising methods in the small business realm is crowdfunding. When an entrepreneur is involved in crowdfunding, that person generally utilizes the Internet to solicit for funding for a specific business idea. Investors can then browse these crowdfunding websites and decide which ventures they’d like to put money behind. Crowdfunding has been shown to raise just hundreds of dollars all the way up to hundreds of thousands of dollars. The primary advantage to crowdfunding is its worldwide online reach. You can quickly and easily connect with a significant number of potential investors than what’s possible using most other strategies.
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Recommended Books on How to Raise Capital for a Small Business:
- How to Raise Capital : Techniques and Strategies for Financing and Valuing your Small Business
- Raising Venture Capital for the Serious Entrepreneur
- Raising Capital: Get the Money You Need to Grow Your Business
- The Crowdfunding Revolution: How to Raise Venture Capital Using Social Media
- How to Get the Financing For Your New Small Business: Innovative Solutions From the Experts Who Do It Every Day
- Financing Your Small Business: From SBA Loans and Credit Cards to Common Stock and Partnership Interests (Quick Start Your Business)
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Category: Finance a Business
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