Raising money for your startup business is not as difficult as you think. However, there are a number of ways of raising capital. Managing the right source can be a bit complex. Each source of capital has both advantages and disadvantages. This article suggests the best ways to raise money for your business.
Crowdfunding refers to the method of utilizing public funds from their own personal funds for your project, in short they invest in your business. To start with, you propose the idea to the public and people choose how much or how little they want to spend on your project. Depending on the type of project, people may spend a lot for on your business (if your project meets their desired needs and criteria). Most crowdfunding sites currently use a reward model where people from all over the world invest in a new business and rewards the product to the customers that’s going to be produced, so that they can test your product, once they like your product then after that you make products in huge quantity and earn profit as well.
From Family & Friends
Your family is a good source of capital raising but not the best as they are easy to approach, but remember owning money to people you know can be problematic and can ruin you personal relationships. Be sure to borrow money they can afford and get a written agreement with the terms clearly laid out even if it is from a friend you are borrowing.
Loaning Money is the most common way for those peoples who raise capital for their Small businesses from the bank. Before approval your banker may request you to have your loan guaranteed by the Small Business Association (SBA). The SBA is a government agency that will guarantee 80% of the value of loan for applicants, who meet their criteria. Also some other banks give loan without any interest, mostly these kind of banks are located in United states and United kingdom or Australia.
These are investment companies who provide money in return for part ownership of your business. Their aim is to invest in early stages of business with high growth potential. They are looking to invest large amount of money,which could be many time more of what you need and their requirement are much tougher to fulfill. The venture capital business is an idea of making few big wins for lot of poor performances. They tend to play an active role in management of your business for possibility of boarding larger businesses.
If you have someone who is already in a business, you can receive seed funding from him/her through a lawful procedure. Of the top 500 businesses, 28% received funding from a co-founder.
When selecting a partner for your business you need to make sure you both have some common goals to achieve. As a business partner, they will have control over the direction of business. It is a good idea to make an agreement in case of a breakdown in the business relationship. This should help specify that the other partner agree to a proposed buyout within a set period.
Finally, be careful to negotiate on your own financing terms with equal tenacity even when you know it might not be possible to achieve this. The difference may one day be worth millions.