Beginner’s guide to raising business capital

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Having an innovative start-up idea to bring into the market isn’t the only requirement for future success. As promising as your current business plan may be, you won’t be able to reach your goals without the necessary financial support. The capital you need for your business concept probably surpasses your personal financial possibilities. To get your start-up going, you need financial support, but how can you actually gather the required amount? You have multiple financing possibilities available, and each comes with its own pros and cons. Look into all opportunities, and choose the option that suits your situation best. The following guidelines will help you obtain a better perspective on the subject and make informed decisions:

Crowdfunding

Crowdfunding has become quite a popular way for entrepreneurs to access early-stage startup financing solutions. Crowdfunding means getting a group of people to back your company with a small amount of money, raising thus the finances your startup needs. If the project you are presenting is appealing, attracting crowdfunders won’t be at all difficult, especially with so many crowdfunding platforms now available on the market. You should however, keep in mind that the backers could have a say in how your business will operate.  

Private investors

Resorting to a private investor – a wealthy individual allocating capital to help a business, expecting a future financial return – could be the ideal solution for you. Getting funding from an investor remains an appealing possibility for startups, regardless of your industry, profile or objective. There are fewer formalities when it comes to private investments in comparison with traditional loans. This option involves a comprehensive partnership – the investor will have a role in future business decision-making. The potential amounts you are able to access might also be higher than any other alternative, and this explains why this financing solutions is so popular. While researching the subject, you’ll find different examples of investors who have managed to increase their wealth by financing new startups, such as: Jon Medved, Peter Thiel and Dorian Barak, a private equity investor and fund manager. Personal, private equity, venture and angel investors are usually the categories entrepreneurs compare and choose from.

Government grants

Often overlooked, multiple government grants are available, depending on the industry you are trying to enter and on the profile of your business. The amount can vary, and writing grant applications will seem time-consuming and stressful, but the programs do come with a wide range of advantages. Science and technology fields usually benefit from most financial support from governments, due to their potential in terms of economic growth.

Small business loans

If your funding requirements aren’t extensive, look into regular small business loans, offered by either banks or private lenders. Reasonable terms and rates are the factors that make standard business loans attractive for some entrepreneurs, but in most cases, one or two years of stable revenue might be required for approval, so this might not work for an early-stage idea.

Financing approval – increasing your odds

Regardless if you opt for crowdfunding, a simple small business loan, or you choose to collaborate with a private equity investor, you need to take care of a few relevant aspects first. Because getting your financing request approved isn’t always easy, you should be prepared with some considerations. Each detail can make a significant difference, so here’s what you need to pay attention to:

  • Make sure you have a solid business plan

To obtain a loan or maintain the interest of an investor, you will need a great business plan. Don’t start looking for funding solutions before you revise your business plan, and check its quality. It’s often better to work with a specialist on the matter, who can guide you in the right direction. A solid business plan can often supersede the idea itself, so dedicate enough time, effort and attention to creating a business and marketing plan that impresses.

  • Have a thorough understanding of your industry

Investors are less likely to pay attention to a startup that has little or no knowledge of its industry. The more extensive your understanding of the industry you are targeting, the higher the likelihood of getting the money you need to fund your business. Do your research by the book. It doesn’t matter if you are pitching your idea to world-famous private investors, such as Jonathan Nelson, Dorian Barak, Stephen Feinberg, or you are discussing with a local lender, you should be ready to answer any questions about your industry to show you are actually prepared for what is ahead of you.

  • Have an on-point pitch

It’s often more about how you present your idea rather than the concept itself. You could be thinking of a highly innovative start-up, but if you are unable to showcase the potential of your business plan drawing an investors’ interest will not be possible. When you are pitching your start-up, be extremely prepared – you need to cover everything from A to Z – the hows, the whats, the wheres and whys. Keep your presentation short and concise, maintain an honest approach and be ready to respond to any question in an appropriate manner.

Raising business capital might seem challenging, considering there are so many important factors that need to be addressed. However, if you take the right course of action, you will be able to acquire the level of funding you demand. With a promising concept in mind and the necessary financial support, reaching your business objectives will become easier, and you will be closer to getting your startup going. Various approaches are available, but the solutions highlighted above stand as most powerful in today’s financial and business climate. Take into account these suggestions, analyze your actions with precise care and make the most out of the opportunities you can access – success might just be around the corner, and with funding in-check, you might be able to reach it sooner than anticipated.