10 Proven Ways To Raise Capital For Your Small Business

In the modern business industry, there are very many factors that may stunt the growth of your business. However, with the right strategy, you can navigate out of the turbulent times. Here are a few ways you can raise capital for your business;

Venture Capitalists

They require equity in your business in exchange for a considerable amount of capital. Many venture capitalists also invest all their energy in a potential business to fasten their return on capital employed.

Pros

– Experts will help you through consultation
– They will give you active support in the office e.g., on legal issues and tax
– They will connect you to their networks
– You will not have to pay a loan

Cons

– You will have lesser control over your business
– The business ownership will be divided
– Many invest in companies that profit them hugely in the short-term

Angel Investors

Like Venture Capitalists, they can quickly raise capital for your business. They usually provide funds in exchange for an agreed percentage of your business.

Pros

– They can take risks for your business
– You don’t have to pay back a loan
– The probability of your business succeeding is high

Cons

– You will not have total control
– It is not easy for them to let go of the business
– They may expect a high return

Friends and Family

Though it’s common for friends and family to fund your business when it’s a startup, they are also a good option to consider when you are stuck. They are the last resort for most entrepreneurs who have evaluated all available options.

Pros

– You may repay the money at low interest rates. You may also not have to repay the money at all.
– Flexibility. They may offer you loans without security or any form of paperwork
– Less pressure on your shoulders as you may repay small amounts for a more extended period

Cons

– They may want to get involved in your business
– Disagreements may damage relationships
– They may demand their money back at a time which may not suit the business

Bootstrapping

This is using your personal funds and assets to boost your business.

Pros

– You will have total control of your business
– You will learn essential skills in the utilization of available resources
– You will benefit from the profit solely

Cons

– Some companies require much capital and cannot be bootstrapped
– Business growth will be slow
– There may be a probability of running into debt

Bank loans

Loans from banks have been the conventional options for raising more funds for your business. You need to research the types of loans and their terms before borrowing.

Pros

– You get to benefit from low interest rates
– It builds your credit and banker relationship
– Monthly installments are predictable

Cons

– You may have to wait for a long time
– The application process requires lengthy paperwork and collateral
– If your credit is weak, you may not get the loan

Crowdfunding

Crowdfunding is mobilizing the public to raise money for your business. It may be online or by planning an event.

Pros

– You may raise a huge sum of money
– It increases your network
– Creates opportunity by building your market

Cons

– Requires a lot of effort and time
– Doesn’t guarantee you investors
– It can backfire, and feedback might be negative

Short-term loans

In the 21st-century, finance firms have increased drastically. Most of them specialize in short term loans to boost their cash flow and improve their working capital. If you are in dire need of money, a short term loan is a good option.

Pros

– It is quick to acquire
– Quicker payment plans are set
– paperwork

Cons

– It has high interest rates
– You may fail to repay at the right time
– The habit could be addictive

Business Accelerators

Accelerators focus on improving your existing business. They may ask for equity in exchange for their expertise and investment.

Pros

– They connect you to their network
– They offer expertise and training which facilitates the growth of your business
– They sell your brand

Cons

– The selection process can be hectic
– Many programs to attend which requires time

Loan Guarantors

Loan guarantors perform brokerage duties between lenders and borrowers. They provide less strict conditions for borrowers and follow up on ensuring the loan is paid as agreed. A guarantee can be limited or unlimited.

Pros

– They improve your credit
– They accept people who have poor credit ratings

Cons

– You have to disclose all your personal financial information to them
– Your credit rating may be affected negatively

Government Grants

There are many ways the government can offer businesses financial assistance. It may use grants to fund a benefit project.

Pros

– You don’t have to pay back the money
– Unlike the rest, it takes the pressure off your shoulders

Cons

– There may be several conditions you must adhere to e.g., R&D
– It requires a lot of energy and time

There are several other ways you can raise capital for your business. You need to evaluate every option to decide which suits your business best.