How to Raise Capital for Your Business or Project
Insufficient capital is one of the most common reasons why startups and new small businesses fail. Regardless of your industry or niche, you are going to need capital to stay afloat in today’s competitive marketplace. So, how can entrepreneurs such as yourself raise capital for your business idea or project?
Banks and other financial institutions offer an affordable way for entrepreneurs to fund their business or project. By obtaining a “small business loan,” you’ll typically receive low interest rates along with attractive terms and conditions. Keep in mind, however, that your credit history will affect these elements. If you have little-to-no credit or bad credit, you could be slapped with high interest rates. Before seeking a small business loan from a bank, pull your business’s credit report from Experian, Equifax and Dunn & Bradstreet. If any information is incorrect, out of date or otherwise erroneous, fix it ASAP. Banks WILL check your credit report to determine whether or not you quality for a small business loan.
An alternative to traditional bank loans is angles. Angels are individuals who provide capital to a startup or business in exchange for either convertible debt or equity. Angles bring more than just capital, however; they also provide advice, connections and other tools to help the business owner success in his or her venture. Angles essentially invest in the entrepreneur instead of the idea, helping the entrepreneur turn his or her vision of a successful business into a reality.
Crowdfunding has become an increasingly popular technique for business owners to raise capital. It involves funding a venture by raising small amounts of capital from a large pool of investors. Crowdfunding is typically done over the Internet, via crowdfunding platforms like KickStarter, GoFundMe, and IndiGoGo. The great thing about crowdfunding is the simple fact that you don’t have to give away equity or IP rights to your product/service. The downside, however, is that you’ll have to invest the necessary time and resources into creating an attractive page on which to present your product/service to crowdfunding investors.
Of course, you can always use your personal money to fund your business or project. Although not unheard of, it’s very rare for an entrepreneur to launch a business without investing at least some of his or her own money.