Not many new business owners have an idea of how to raise capital for a business.
Whatever your industry or business model is, you need funding to get your business off the ground.
Getting new business funding may be the single, most challenging thing you will ever do for your new business, but it can also be the most rewarding.
The good news is, there are plenty of ways to raise money for a business.
5 Simple Ways To Secure Funding For Your Small Business.
1. Personal saving
It’s always advisable to dip from savings to start-up your own business. If you’ve got none now, you can get a job to start saving up something. A full-time job isn’t compulsory, you can always do a part-time job.
2. Contact your friends and family members.
You can also reach out to friends and relatives to help you with something to start your boutique. For me a loan from a friend is better than that from a bank.
Nevertheless, this doesn’t comes as easy as it sounds. Because this days, people want no part of what they won’t benefit from directly or otherwise.
3. Through Business Grants
If you’ve been doing research on how to raise capital for a business, you’ve probably already read tons of articles about traditional sources of capital like business grants.
Business grants are often given by government agencies, local business partners, and even certain charities, to business start-ups who show great potential in a specific niche.
So, how do you get grants for your startup business?
The first thing you need to do is look for a grant program that you’re qualified to apply for.
Eligibility can be based on your location, race, business niche, and business model.
Once you’ve found a grant program that you’re eligible for, you need to complete your application and get ready for the review process.
Make sure that you have a well-prepared business plan that will show potential investors how you intend to put the grant into use.
It is one sure way of how to raise capital for a business.
Pros
–Small business grants are technically free money since you don’t need to repay them.
-Online companies and bootstrapped businesses can benefit greatly from business grants.
-There are many institutions that offer grants to deserving businesses.
-There are also tons of free information online that can help you win a business grant.
Cons
–Business grants are not exactly easy to get.
The process can be time-consuming and most institutions require an insane amount of paperwork.
–Since you’ll be asking an institution for free money, you need to justify your purpose.
You’re basically entering a contest where you need to compete with others.
You need to show potential investors that you have the best business idea out of the lot.
-With hundreds of thousands of entrepreneurs out there looking for how to raise capital for a business, expect the competition to get tough.
4. Raise Business Capital Through Bank Loans
Personally I think this option is a very risky one but it a sure way to secure funds to start-up.
With your business plan, you can contact your bank or others into granting loans to business owners.
Make sure you secure enough funds to run your business for at least 6 months. Remember you’re just starting out so don’t expect customers to start patronizing in mass.
Having that at the back of your mind, secure enough funds to keep your business moving. Because you’ll have to pay workers even when you are not recording huge profit at the introductory stage of your business
Key requirements to access loans in Nigeria
Name
DOB
Address
Employment status
Income
Expenses
Bank detailed
Furthermore, If funding a new business with a grant doesn’t appeal to you, then you might be better off getting a bank loan instead.
This is one of the more popular and more practical ways on how to raise capital for a business.
Especially, since most banks offer this as a service to business owners.
Business owners with existing companies need only a few documents to show that they’re creditworthy.
However, startup business owners might have to rely on their own personal credit history to get a bank loan.
So, before you apply for a loan, make sure that your credit score and your business bank accounts are in order.
Pros
-You don’t have to be accountable to the bank on how you plan to spend the money.
Bank personnel won’t get involved in any aspect of your business.
-You’ll know exactly how much you need to pay in your monthly payments.
There’s no second-guessing the terms once you’ve signed the loan agreement.
-While you’re paying off your business loan, you’re also building your business credit with the bank.
Over time, the bank will see you as a good client and offer you other loans with preferential rates.
Cons
–You need to prove that your business has the capacity to pay off the loan.
This could involve a lengthy paperwork process.
–You might have to wait a few weeks at a time to know whether your loan is approved or not.
If it’s your first time applying for a loan, expect it to be a long wait.
–Most banks require collateral or a strong credit score before they can give you funding.
5. Raise Business Capital Through Angel Investors
Angel investors come in all shapes and forms.
Some help small startups by providing capital in exchange for owner equity, while others work through investor pools.
They are another great source of how to raise capital for a business.
Angel investors usually like to work anonymously via the internet so it’s no wonder that most of them invest heavily in tech products.
Want to know how to get investors interested in your business?
First, you need to meet them where they are.
These days, you can meet angel investors just by searching online or attending conventions.
You can also check out online platforms that help connect angel investors with aspiring entrepreneurs.
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