Many people think that beginning and operating a business only means profiting in money, but the most important detail people miss is the cost of running and starting it. Apart from your amazing business idea and offering a great societal solution, launching a business means having capital. Business capital is defined as the amount of money needed to produce your product and services. In layman’s term, it means money.
In order to smoothly run your business, you need to have a positive working capital and the ability to operate efficiently on a business budget. This is to ensure that you are capable of paying off all your expenses without emptying your funds. Everyone isn’t able to easily seek funding, unless you’re a big corporation. To help you materialize your business, here are some ways to raise your capital.
Use Your Own Money
Bootstrapping is an act where you start your business with little to no money, especially from outside investors and government aid. This process helps prevent ownership dilution through equity.
When you bootstrap, that means you are thinking of using means through yourself. That usually leads to your savings. Think of this kind of savings as a delayed gratification process. You save at least 20% of your income from your day job and easily reduce your debt, then wait until you have enough funds to begin your business. If you want to hasten the process, you can take in some alternative ways to make money in your free time.
Friends and Family
Another way to raise your capital is by using trust as your main resources. Trust from your parents, relatives, and friends can be very helpful. You are lucky if your parents have enough money to give you.
Borrowing money from friends and relatives can also be under certain conditions like debt repayment or equity financing. Though this usually has no requirements other than closeness and trust, it still has the risk of putting a strain on personal relationships if things go downhill.
Your Business Itself
This does not apply to every business, but if you happen to offer services, you might want to try this. A business that offers a service can usually get away with a lot of capital. It only requires a few expenses to operate, since it does not heavily rely on equipment, inventory, and an office. Operate your service or business itself, and it can fund necessary capital for further expansion of your business.
Banks offer a lot of loaning services and that includes small business loans. They do require a number of requirements, credentials, business proposals, and your personal credit score. Make sure you have a compelling business proposal that displays how profitable your business can be to entice the bank to provide you money. It also helps if they know that a portion of their own money is included in the capital of your business.
A number of government departments and bureaus offer small loans to aid certain businesses related to a certain industry. These programs are mandated to foster growth and economic development for a specific industry, most likely in agriculture and local trade.
The digital world not only gave us social media and the power to know everything in a click from a search engine, but it also fashioned crowdfunding. It is the practice of funding projects, ventures, personal advocates, and dreams or medical needs by collecting small amounts of money from a significant number of people on the Internet. Around USD $34 billion was raised by crowdfunding worldwide in 2015 alone. Maybe you should take a look and see if your business resonates with any.
If you feel like facing loan sharks is your game then maybe you should seek funding from angel investors and venture capitalists. Though both of them are the same, as they usually ask for a share of ownership in exchange for money, they are different.
Venture capitalists are companies or individuals that are pooled from a group or number of investors, while angel investors are wealthy businessmen or entities. Angel investors also usually provide mentorship to a business though safeguarding their investment.