In business. Cash is king. No business can survive without money. A business needs money for product development, marketing, hiring people, and expansion. As a company founder, you need to come up with many ways of raising money to fund your business operations. Below are various ways of raising funds for your business:
Bootstrapping is the process of raising business funding from personal finances. These funds can be from personal savings or savings. Bootstrapping is the most effective way of early startup funding. It makes external investors and lenders show interest in your business.
ii) Launch a crowdfunding campaign
There are many crowdfunding platforms that connect startup founders with like-minded people who can show interest in their product or business idea. Examples of these platforms are Kickstarter and Indiegogo. A start-up owner can showcase his/her business idea and raise money in terms of loans and equity investments.
iii) Friends and family
A start-up founder can raise money from friends and family members who believe in their idea and share their vision. This money can be in the form of donations, loans and equity investments.
A business owner can borrow a loan from a bank or other lending institutions. These loans are usually paid with interests. For a business owner to access a loan, he/she must prove the business viability and its capability to scale. Security in terms of assets is also required in order to access the loan.
v) Angel investors
An angel investor is someone who invests his/her money in a business in exchange for equity in the business. The angel investor owns a certain percentage of your business but does not take part in the day to day running of the business. However, the angel investor may be available to offer advice when needed.
One advantage of raising money from an angel investor is that the money does not have to be paid back, unlike when you take a loan. However, since the angel investor takes equity in your business, you as the business owner loses some control over your business.
vi) Venture capitalists
There are firms which are involved in funding promising startups in return for equity. The startups receive funding and mentorship support. These firms are called venture capital firms. They are mostly funded by angel investors who bring their funds together. They can also be funded by individuals. The start-up founders are involved in the running of the business while receiving funding from the VCs.
vii) Incubators and accelerators
A business incubator is an organization that helps an entrepreneur with a business idea take the idea to implantation stage. These entrepreneurs are connected with mentors and industry experts who give them the support they need to move from idea to implementation stage. The incubator programs run for a specific period of time, say six months, after which the entrepreneurs receive funds to implement their idea.
An accelerator on the other hand helps entrepreneurs with an existing start-up or product accelerate their growth. During accelerator programs, which run for about 6 months, entrepreneurs go through business development and growth stage and get connected to mentors who can help them take their business to the next level. They also receive funding to implement their business growth plans. They usually give up equity in exchange for the funds.
viii) Selling assets
A business owner may sell some of their business assets to raise money. These assets may include land and equipment. This money can be used to hire staff, marketing and product development
This is money given by charity organizations, government institutions and other well-wishers. This money is given to promising innovators and it’s not paid back in the form of equity or interest.
x) Product pre-sale
An entrepreneur can develop the first version of his product and sell it to friends, family, and other people in his network. This will help the entrepreneur raise money to develop many and better versions of the product.
There are many ways of raising capital for your business and the entrepreneur needs to adopt ways that work best for his business.