How to Raise Capital for Your Business: 6 Effective Ways

by Josh Biggs in Finance on 20th July 2020

To be successful, a business needs capital. This helpful guide lists 7 effective ways of how to raise capital for your business.

A recent survey shows 42% of entrepreneurs start their business with less than $5000. 93.9% of start-up funding comes from personal finances or income from a job. 

These statistics show getting funding for your small business can be difficult. Many entrepreneurs are bootstrapping their business, which can slow business growth and prolong your success. 

Fortunately, funding your small business does not have to be complicated. If you know what your options are, you can raise the funding, start your business, and be on the road to success. 

If you are an entrepreneur wondering how to raise capital for your new business, this short and simple guide is for you.

1. Commercial Lenders

A great option to raise capital for your business is to work with a commercial lender. These loans are approved for those who can back their loan with collateral. You can find a commercial lender by using a service like Your FundingTree, which matches lenders to borrowers.

2. Crowdfunding

An effective way for how to fund a business is to launch a crowdfunding campaign. When you crowdfund, you share the story behind your business, which inspires everyday people to help you fund your dream. You can offer incentives for financial support and help people feel as if they are part of a bigger purpose. 

3. Personal Savings

Personal savings is one of the most common types of business fundraising. Many people work one or two jobs and save for a long period to be able to launch their business. While this method takes longer than others, it does allow you to start your business without any debt. 

4. Angel Investor

One way of raising money for a business is to work with an angel investor. Your angel investor is usually a wealthy person who enjoys investing in exciting business opportunities While angel investing is not a loan, the investor does receive a percentage of your company in the form of equity.

5. Bank Loans

Another common method for new business funding is to take out a bank loan. This can be a personal loan or a business loan. Depending on the interest rate and repayment terms, funding your business with a loan can be a simple way to launch your start-up. 

One other option for existing businesses is printing new bonds through which they get funds.
Here you would need an investment bank that would first evaluate the risk, price, underwrite, and then sell them. If you are not familiar with investment banking WallStreet Prep has a guide to help you out.   

6. Start-Up Accelerators 

An alternative method of funding for start-ups is joining a start-up accelerator. 

With this method, you will receive funding from an organization that helps start and grow businesses. You may be required to apply for the program, take business classes, and get approval for your business idea before receiving funding. While the process is somewhat difficult and highly competitive, joining an accelerator can supercharge your business growth. 

This Is How to Raise Capital for Your Business

For every entrepreneur wondering how to raise capital for your business, this guide is for you. 

There are many options available, such as commercial lending, crowdfunding, bank loans, and angel investors. You can also apply for government loans, start-up accelerators, or use your savings. 

Whatever method you use, you can successfully fund and start your business. 

Don’t forget to browse our site for more tips on starting and running a successful business.

Categories: Finance