How do you raise money for your business is amongst the most common questions most business owners or entrepreneurs ask. According to the United States Small Business Administration in 2016, 73% of small businesses sourced money for their businesses.
Whether your business is an existing entity or a startup, there are various reasons you’ve decided to raise money for your business. As money cannot just be harvested, it has to be sourced.
BELOW ARE SOME TIPS ON HOW TO RAISE MONEY FOR YOUR BUSINESS.
This is when you put together your personal money to fund your business, this is the strategy adopted by many businesses, especially startups, most people might not invest or borrow you money if you’re just starting out. You are less bothered about paperwork, obligations to pay back, and so on.
However, this might not be easy if the business requires very large funds.
FAMILY AND FRIENDS
This is another way to raise money for your business before going through external sources, they are easier to convince, and more likely to demand less stringent repayment terms compared to external sources. However, if the business fails and repayment becomes difficult, your relationship with them might go bad.
Also, accord respect to them by letting them know about your business plan, repayment plan, liabilities, and so on. Make sure all agreements are written, understood, and signed by all parties.
With the use of the internet, you can connect with people who would have ordinarily not know about you or your business. You’ll have to describe your business objectives, your services or product offerings, and so on. If the people buy into it, they will contribute money towards supporting your business.
You’ll have to set up a campaign with the desired amount of money you want to achieve, it is highly suggested to give a tip/offer to donors as a way of appreciating them (e.g discounts, early-bird benefits). A good thing that also comes with using this method, to raise money for your business is that you’d be doing indirect marketing. Some websites you can get started on are GoFundMe, Kickstart, Bonfire, Fundly, etc.
These are people who invest in your company for shares. We would talk about two types, Angel Investors and Venture Capitalists.
These are people or groups, that invest in businesses at their earlier stages, they are always on the lookout for the next business to invest in, they have more returns on their investments when the business becomes a success. They can also guide your business on the required path.
These are people or groups that invest in businesses when they’ve gone past their earlier stages, and already generating revenue. They look for more stable companies compared to startups, they want their return on investment relatively shorter compared to angel investors.
GRANTS AND PROGRAMS
These are funds set aside by governments, individuals, companies, etc for specific purposes. This involves application, screening and if successful, you’d be awarded. Let’s briefly talk about some form of grants.
This is when businesses (mostly startups) are trained and mentored in business management, given “access to investors or capital” etc, by an organization or company.
This is another way to raise money for your business, you’d register and take part in competitions or contests and aim to win the monetary size(s).
There are varying monetary grants given by governments through its ministries or parastatals, the grants can be for startups, economic relief funds, and so on. All you need to do is to apply appropriately, and if you’re shortlisted, you’d be amongst those awarded the grant.
This is one of the oldest methods to raise money for your business but many do not prefer it, you visit a financial institution and meet up with their requirements.
Conclusively, with multiple ways for you to raise money for your business available, you need to ask yourself, how much money do I need? What do I “really need the money for? And which of the options is the best for me and my business?