The biggest concern for every startup enterprise usually is how to raise capital. Funds are needed at every step of your business development. This article is based on ways you can raise capital for your business. Every start-up requires sizable investment before it starts to deliver profits that in turn are utilized for the growth of business.
Crowdfunding is the first way to raise capital for your business. Crowd funding is one of the fast emerging effective technique of raising capital for startup enterprises, although, it is still in its infancy. The crowdfunding concept as a way of raising capital is evident from its name that refers to the process of funding a project by the personal funds of the people involved.
The process of crowdfunding begins from a business proposal. You propose an idea to people who you think would have an interest in your business idea and would be ready to invest in it. The contributors or funders have the flexibility to choose the amount or percentage. It is usually an online process where investors get small amounts of equity in lieu of the funds they contribute to the enterprise.
In the US, crowd funding has gained popularity as a means of raising capital for startup businesses after it got direct mention in Jumpstart Our Business Startups (JOBS) Act which is aimed at encouraging and raising capital for small businesses in the US by easing different securities regulations.
Angel investing is another means of raising capital for startup businesses. Angel Investing is the process of getting a business funded from Angel Investors who are the affluent individuals eager to invest in start-up business. These investments are usually in lieu of ownership equity or convertible debt. For those unfamiliar with the term, a convertible debt is a bond with a maturity term of over 10 years, which can be converted into shares of the issuing company or cash value.
Some beneficiaries of Angel Investing are Google, Twitter, Facebook and Skype as they have receive capitals from angel investors. Angel investing does not only help in raising capital for startup business, they also give quality and professional advice to entrepreneur and also help with connections that can help entrepreneur in business development. Some prominent angel investing networks include Tech Coast Angels, Golden Seeds and Investors Circle.
Venture capital also helps with raising capital for startup business. Start-up entrepreneurs can go for venture capital to fund their business needs. Venture capitalists are interested in investing in early-stage businesses that have high potential for return on investment. Typically such business ventures are accompanied by a fair amount of risk but the VCs are prepared for that. Venture capitalists usually hold equity in the business t
Bank financing is the last we will be talking about on how to raise capital for startup businesses. Bank loan is among the most common ways in which new business entrepreneurs use to raise capital for their business. Before approving the loan, the bank may demand a loan guarantee from the Small Business Association (SBA) – a government body who guarantees up to 80% of the total loan value for the applicants who comply to all desired guidelines.