How to Raise Capital for Your Business

Raise Capital for Your Business

Raising capital is beyond a doubt the single biggest challenge for any business, be it running or upcoming. Apparently, it’s the very fuel that keeps a business going.

From its day-to-day operations to long-term goals, employee wages to marketing and promotion, and development to overall expansion, everything boils down to money.

For instance, a lack of cash can keep you from employing the manpower and resources that are needed to meet your production value.

Insufficient funds can also mean losing out on significant opportunities which if bagged could have taken your business to a whole new level.

In the worst-case scenario, it simply means that your business is failing. As it forces you to sell assets, cut costs, or go out of stock until you lose it all and declare bankruptcy. 

The point is- with money being your only alibi in the world of business, it’s important to maintain a sufficient amount of it at all times.

There are many ways to get the working capital you need to kickstart a business or save a dying one from a financial crisis. Let’s take a look.

1. Bootstrapping and profit reinvestment

Starting out you may not have a lot of funding options for your business, except for yourself. Apparently, it’s also the best way to launch one considering the lack of financial liabilities that come with it.

Plus it lets you invest your initial profits into the further expansion of your business rather than clearing the debts. 

2. Crowdfunding

It’s where you accumulate the funds by showcasing your business plan, vision, idea, etc on a crowdfunding network such as Kickstarter, GoFundMe, and Indiegogo.

If intriguing enough, the platform can get you a number of small investors who’d be willing to either pre-order what you have to offer or make some contributions to your business investment otherwise.

3. Business Loans

As one of the best ways of getting a small business working capital, loans and lines of credit are the top lending choice for 55% of companies.

A good credit score with no delinquencies can get you the loan at an even lower rate of interest than any other medium of financial assistance.

4. Angel Investors

Angel investors are wealthy individuals who invest in start-ups and high-risk companies in exchange for equity or the value of shares in your business.

Sometimes working in groups, these angel investor firms can also assume the role of advisors by investing in large amounts and expecting a higher rate of returns. And this is why it’s important to maintain a solid relationship with your investors 

5. Venture Capitalists

Unlike angel investors, venture capitalists tend to invest in large companies and tech start-ups with the hope of making big money!

So unless your requirement is a few million to get on with your business, it may not be the right option for you. Besides, they take much more equity than angel investors along with the power of decision-making.

6. Friends and family

When everything goes haywire, who do you turn to? 

That’s right- friends and family. 

The same goes in business as it’s one of the best ways to raise fast business working capital in times of a sudden crisis.

Just make sure to keep a note of it and pay them back once you’ve gained enough profits while keeping each contributors’ financial interests in mind.

7. Fanbase Donations

And not just your family and friends, you can also approach your followers, supporters, and online influencers to assist you in meeting the desired funds.

Apart from crowdfunding, you may introduce contests, games, and reward-based programs with limited-edition merchandise, exclusives, goodies, and other giveaways in exchange for their financial contributions.

8. Government Schemes

Government-backed loans and business offers are preferable mediums for raising working capital for your new business. 

Although they do have strict criteria, most government plans don’t require a higher return, payback, equity, or any kind of stake in your business. 

Make sure to fulfill your CSR or Corporate Social Responsibility though when your business is up and running.

Tip: Eco-friendly ideas are always welcome when it comes to taking financial assistance from the government. 

9. Private Equity investment

It is the type of investment in which capital is raised within the members of your company by considering your past finances.

As a conventional way of raising funds, it is held privately by your business partners in exchange for equity.

Being a much more suitable option for mature and experienced companies, it may not be the right one for startups and small businesses unless you can guarantee a financial incentive.

10. Stock selling/ IPOs

Selling stocks or going for Initial Public Offerings (IPOs) is one of the most common ways of saving a business from failing.

As the last resort to all your financial needs, it’s when you make your company go public by selling its shares to investors, or better yet “shareholders”.

Most major brands and companies these days have millions of shares with thousands of shareholders. 

The biggest advantage of having a public corporation is that no single individual can own the majority of your shares, let alone 100% of it. As a result, each shareholder ends up having a small portion of the overall ownership of the firm and not entirely.

Now, while there are many other ways of raising capital for your business, such as online micro-financiers, NBFCs, business credit cards, and so on, the thumb rule is this- Never borrow more than you can return. Period!

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.