A lot of us have different dreams. The things we want to do, our business ideas, and how we intend to leave our marks on earth. While a few people retire to the background and keep working for other employers, others garner courage and kick-start their business ideas. However, courage is not all it takes for you to succeed in business. For one, you need the right finances to be able to push the business. There are many ways with which you can raise capital for your start-up. Some of them are directly related to the type of business you are starting, and others are just generic. In general terms, here are smart ways you can raise capital for your start-up.
Table of Contents
Friends and Family
The easiest way you can raise capital for your start-up is by getting friends and family members on board with your idea and having them give you capital for it. While some of them might opt for an equity stake in your business or offer you the funds as loans, you are generally more relaxed as there are majorly no rules.
Credit card loans, loans from Microfinance banks, or loans from commercial banks; loans are debt obligations that the receiver has to the giver. Hence, you would have to repay these funds after a specified period of time. The risks of this for a start-up, are many. First, you have to tie the loans to an asset as collateral which might be risky, and you also have to pay interest rates which could be high.
If you believe your start-up has a long-term potential for growth, then you can get a venture capital firm to provide start-up capital. Venture capital investments are usually offered to emerging businesses or small businesses in their early stages. Venture capital, is, however, a form of private equity so you would have to give up a few shares.
Be part of an accelerator
This is one of the fastest ways to raise capital for your start-up. Accelerators give you the required financing, offer you mentorship, and place you in a controlled environment for you to grow your business idea. You would be made to pitch your idea before a panel before you can be accepted into an accelerator. It is, thus, very competitive.
Get a business grant
There are so many business grants offered by private investors and governmental agencies to businesses in diverse industries. You can apply for a grant, and the funds can be used to kick-start your business idea with no additional cost to you or ill condition attached to it. Of course, this is extremely competitive.
Angel / Private investors
You can also raise capital for your start-up by pitching to angel investors or private investors and having them come on board with you. They offer you funds to grow your business, and they are usually in it for a percentage of equity.
In next story we will talk about: WHAT YOU SHOULD KNOW ABOUT A PREFERRED STOCK