Starting a new business from scratch can be very expensive.
The exact amount of money that you’ll have to put out to jumpstart a new business venture will obviously vary depending on what kind of business you have in mind. But most experts agree that it takes about $30,000 to create the average new business.
This means that you’re going to need to know how to raise capital for a business prior to trying to get it off the ground. The last thing you want to do is have your business come crashing back down to earth after you start it because you didn’t take the time to get enough funding for it.
The problem that many people run into, though, is that raising money for a business isn’t always easy. Since many new businesses fail within their first few years, it’s difficult for people to figure out how to raise money for a business.
Let’s take a look at some of the options you’ll have when trying to raise money for business purposes.
Dip Into Your Own Savings Account to Start Your Business
Do you have a bunch of money saved up in the bank for a rainy day?
Spending that money might put your personal finances at risk. But it could be a risk worth taking if you really believe in your business idea.
If you’re going to go in this direction when deciding how to raise money to start a business, it’s important for you to crunch the numbers to see exactly how much money you need. You don’t want to blow through everything you have in savings and still come up painfully short.
If possible, it’s best to avoid putting your own money up when starting a business. But it could ultimately be what you have to do in the end if you can’t find anyone else to buy into your business.
Talk to Family Members and Friends About Investing in Your Business
Asking your family members and friends to borrow money for any reason is almost always a bad idea. If you can’t pay them back what you borrowed, it could very well destroy your relationship with them forever.
But if you have people in your inner circle who like investing their money in good ideas, it wouldn’t hurt to ask them about potentially investing in your business. They might be interested in hearing more about it once you bring up the idea.
If you take this approach to raising capital for a small business, you should provide your family member or friend with a percentage of your business so that they have a stake in it moving forward. This might get them more excited to become a part of your business.
Start a Crowdfunding Campaign to Generate Funds for Your Business
Is your business idea based on a killer product or service that you want to start selling to the masses? If you have a strong enough idea, crowdfunding might yield the kind of results you’re looking for when figuring out how to raise capital for a business.
Crowdfunding involves asking a large pool of people to each pay a little bit of money for the right to be one of the first ones to get access to whatever product or service your business has to offer. It’s a great way to get your hands on a lot of money thanks to small payments from a bunch of different people.
Just make sure you’re ready to provide the product or service that people want to them once they hand over their hard-earned money.
Look for Angel Investors That Might Be Interested in Your Business
There are about 18 million millionaires scattered throughout the U.S. right now.
Not all of them are interested in trying to use the money they already have to make even more money. But many of them have turned themselves into so-called “angel investors.”
Angel investors are people who specialize in giving small businesses the money they need to get things going in exchange for sizeable stakes in them. Oftentimes, angel investors will ask for anywhere from 5 to 50% of a company when they invest in it.
It’s not always easy to convince angel investors to get on board with a new business idea. You’re going to have to pull out all the stops to do it, including using things like video brochures to your benefit.
But if you’re able to rope an angel investor into the mix, you’ll get plenty of capital to start your new business.
Apply for Loans Through Different Lenders to Get the Money Your Business Needs
All the ideas that we’ve pitched here are great for those trying to learn how to raise capital for a business. But at the end of the day, taking out a loan of some sort is usually the easiest way for business owners to raise money.
According to the Small Business Administration, this is how about three-fourths of all new businesses obtain the necessary funds to start their ventures. It’s why you should at least consider taking out a loan when raising money to start a business.
You will need to have a very thorough business plan and good credit to get approved for a business loan. But it’s worth taking a shot on trying to get one if you don’t think any of the other options here will work.
Learn How to Raise Capital for a Business and Pick Your Best Option
You might have the best business idea in the world. But if you don’t know how to raise capital for a business, it’ll all be for naught.
Think about which of the options listed here might work best for your business. Then, do whatever it takes to use your preferred option to raise capital for your company. You can get the money you need for your new business if you work hard enough at it.
Interested in reading more about how to start a new business? Check out our other business-related articles to get great advice on doing it.