Every new business needs money to get off the ground, whether it’s a lot or a little. But, as entrepreneur Vinod Ramchandra Jadhav describes, there are many different ways to raise funds from outside sources to launch your new venture.
Understanding how much money you need to start your new business is step one. Next comes figuring out the best source for you to raise capital. Here are six of the best options to help fund the launch of your new business.
1. Startup Loans
A common option for entrepreneurs looking to raise capital for a new business is to obtain a startup loan. Some traditional private lending options might be out of the question for startups since they typically require the company to have a proven track record of success. But, some loans are designed specifically for startup businesses.
Some private lenders will offer these startup loans to new business owners, though they may require some form of collateral to secure the loan. The Small Business Administration also offers loan programs that can help.
These loans are offered through private lenders, and the SBA simply guarantees a portion of the loan to help the lender protect against the risk associated with the loan. The SBA loans could be a good option, as they often have lower interest rates than other private loans.
A popular option today is known as crowdfunding. Some online sites are dedicated to connecting entrepreneurs with the public for fundraising purposes. For example, entrepreneurs can set up a crowdfunding page on sites such as GoFundMe and market their idea to people who may be interested in investing.
In return for a set investment amount, people can receive benefits such as swag and a piece of the company. Many successful startups have relied on crowdfunding sites to provide the necessary capital to get them on the right path.
3. Angel Investors
TV shows such as Shark Tank have brought angel investors into the public eye. These investors are high-net-worth individuals looking to put their money into action by investing in startups they believe are primed for tremendous success.
Angel investors can provide an excellent source of startup capital for entrepreneurs. Instead of paying back the money invested into the business, entrepreneurs give up an ownership stake in their company.
This allows them to maintain a stable level of capital in the company. In addition, some angel investors will become active advisors to the entrepreneur, helping them succeed by giving advice or even connecting them with other outside partners.
Of course, the downside of angel investors is you have to give up an ownership stake in your company.
4. Friends and Family
Many entrepreneurs will turn to friends, family members, and colleagues for the capital they need to start a new venture. This can be a great way to raise capital for a number of reasons.
For one, you’ll be involving those closest to you in your new venture. Depending on how you arrange the partnership, they could, in essence, benefit from your success. Another benefit is not going through a potential strenuous loan application process.
A potential downside is that it could hurt your relationship with these people if your venture doesn’t succeed.
5. Credit Cards
Depending on how much capital you need to raise, you could use credit cards to fund your startup. If you have a solid credit score, you might be able to qualify for a promotional interest rate of 0% for 12 months or more. This could allow you to spread out startup expenses over a period of time while you build your revenue base.
6. Venture Capital
Venture capital is similar to angel investors. These people — and sometimes companies — provide funding to startups looking for capital.
Vinod Ramchandra Jadhav says that while some VCs want an equity stake in exchange for the funding they provide, most will simply charge interest.
About Vinod Ramchandra Jadhav
A self-described first generation Entrepreneur, Mr. Vinod Ramchandra Jadhav is the Chairman of SAVA Healthcare Limited, India and Managing Director of Regent Global DMCC, Dubai. With a professional career spanning more than 30 years, he is well versed in hydraulic systems, Industrial Engines, Global sourcing, Supply chain management , ERP database design , Cross Border Trade, International taxation , First-to-Market Generics & Veterinary Medicines in various capacities.
Mr. Jadhav holds Diploma in Mechanical Engineering and a graduate Diploma in Materials Management.