5 Ways To Raise Capital For Your Business

The process of raising capital for starting a new business can look like an intimidating task. However, this will not be intense when you use some basic business practices.

To start off, discuss this with a professional business attorney and not the family lawyer. When it pertains ways that equity capital may be raised, there are many laws involved. Especially when you are raising the funds from the public.

Also, these laws keep changing often. You, therefore, will need someone familiar with these laws. The individuals should also know how to ensure that the business contracts are done to protect your business as well as you. More so where the fine print is concerned.

For someone with a viable idea which will get good returns for the investors. You will need to come up with a compelling business plan. Then the likelihood is high that you will find some investors to work with you.

When you are considering to get outside help or equity capital to finance your business. You will need to do a few things first, which will make your company more appealing to potential investors. Use these easy tips, and you will soon be raising the funds you need.

Angel Investors and Venture Capital

Before you go looking for venture capital, take a closer look at your business from the viewpoint of an outsider. Try and answer some questions such as: whether your business has a steady track record (Many venture capitalists do not invest in newly established companies). find out if your business has the potential to become very big in a span of 5-7 years. (People will invest in the business since they are seeking for returns on their investments — the bigger the better.)

Find out whether your company owns a good portion of its market. Or whether it will stand to acquire a huge share in the coming 12- 18 months. (Different from common belief, your business does not need to be engaged in high tech for it to draw in venture capital).

When you are able to come up with a positive answer from the above questions. Then the next step would be to locate a venture capital organization. Their goals and ideas need to be in alignment with yours.

The next step will be to consider your “influence circle” to see whether you know a person who will introduce you personally to someone from the venture capital institution. (investments are made in people, as well as in companies.)

Offering Company Stocks To The Public

Even when the Singaporean security laws have made things easy for companies to offer their stocks to the public. This is as a means of raising needed funds, it still is probably the riskiest choice.

This option is usually not recommended for rather new and very small companies. Due to the many legal issues concerned, it is important that you consult beforehand with an informed attorney. You need to realize that lots of strain that comes with operating a public company.

Also, keep in mind that there is a significant loss of control and autonomy. Before you make this choice, you need to be utterly certain that this would be the best decision for your company.

Using Credit Cards Or Your Savings

Most entrepreneurs use this option as a way to raise required business capital. But ahead of choosing this option, you can talk to a financial advisor. Doing this will help you take into account the long-term effects of using life insurance, your savings, credit cards or personal loan. This is particularly when it happens that the business venture goes wrong. Also when it does not yield the planned return on investment (ROI).

When you eventually opting to use credit cards to fund your business project. Take your time to shop around as you will be able to find a card that comes with the best rates of interest. This is a card that will give you the most benefit for your money.

You can also talk to your moneylender for a personal loan deal. When choosing a moneylender for a loan, ensure that they are licensed and legal.

Current or Potential Employees

Amazingly, this is one very common way of raising equity funding (especially for new establishments). In this method, you will invite the current or your potential employees giving them the chance to become investors.

In using this method, you will not only get a very committed personnel. But most equity employees will be willing to take below-market wages at the beginning (more so when you set the pace). This method has other advantages, but it also has its pitfalls too. Also, before you choose this method, consult a business attorney.

Make sure you have policies in place which address potential problems. For instance, what you can do when an employee’s output is substandard. Or when a worker quits and sets to compete with you once they have learned all of your business secrets.

Establishing a risk management strategy and looking at all eventualities is the move for this method.

Getting Funding From Relatives

Though this may look like begging, and probably is a difficult task for you to humble yourself. It may come as a surprise, but according to a new survey, nearly 30% of business people said that they were able to raise part or all their capital through their family members. So when this is the course of action you choose.

Ensure that you work with an attorney to draw up a business contract. Also as you approach family members, discuss with them concerning their investment just as you would with any other investor. Give them details of the amount they stand to make. Avoid talking about how much their help is needed. Then ensure that you uphold your part in the agreement.

Regardless of the decision, you make when seeking equity capital. Through planning ahead, following your attorney’s advise and doing your research. You will increase your chances of raising the amount you need. At the same time, you will make your relationship with the investors a beneficial one.

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