Raise Business Capital
Perhaps, you're starting a new business or need to raise capital for your existing business. But there are several ways to raise money for your business, so it's important to understand all the options out there to raise capital and find the right strategic fit that reflects your long-term goals. If you want to maintain as much equity in your business as possible this will impact the methods available to raise capital. Alternatively, you might be open to taking on partners who hold a large portion of the equity in your business in exchange for providing the money to grow the business. So, first define your long-term goals then focus on the sources of capital writes J Dean @ SCS.
Today, interest rates are rising steadily, so many small - mid sized businesses are feeling the squeeze. As the higher the interest rate you're paying, the lower your profit and return on investment. The higher interest rate puts an added strain on your business whether its a small business or a large corporation.
And the ability to grow the company becomes more challenging in order to flush in new markets and remain competitive in the research and development of new products or services.
Choosing the most comfortable source of capital funding should be approached with much thought and examined in detail with regard to the risks versus rewards impact on the business and any potential share holders.
Equity financing occurs with a company raising capital by selling shares of company stock. The shares can be common or preferred shares. The concern with equity financing is that you are effectively selling off little pieces of business ownership. But equity partners may add experience and other benefits such as opening up powerful contacts within an industry.
Debt financing occurs when you borrow the money to grow the business. Entrepreneurs often get into significant trouble using debt financing. In a high interest rate economic market you run a risk of not being able to keep up with paying back the debt plus interest in periods of slow or recessionary hardships. Debt is generally the most risky option to raise money. Although, debt is useful in real estate and other situations, proceed with caution.
Personal savings is a way to avoid debt and keep greater amounts of business equity. Using your savings can be a fast way to ramp-up your business plan or invest in new existing business opportunities. But do your homework, know the details, set a strict schedule to replenish i.e. put back your savings money. Basically, you're relying on the profits from your business venture to pay back the savings money you used. Be honest to pursue a business that is truly making a profit. Don't fall in love with the dream if it's not truly making a profit.
A traditional bank business loan is an option for existing businesses with good credit scores and a track record of success over the years. But loan approval is not a guarantee and strict payback schedules are set by the bank. If your business has a healthy track record over the years, a bank load is a good option to consider.
Crowdfunding is another option to consider. Crowdfunding enables a large number of people from all different financial levels to invest in your business. You are then asked to pay back the money in some cases or the terms maybe nearly good will. Top Crowdfunding networks include GoFundMe, KickStarter, Indiegogo which may require a payment charge and other fees. Generally, Crowdfunding is a viable option for startups, entrepreneur gigs and nonprofits. Be sure to clearly present a well defined business plan and legitimate statements.
Angel investors are wealthy individuals that may be interested in investing capital in your small business. Angel investors will expect a percentage of equity and may want a slice of the royalties or sales, depending on the risk involved. Create a well defined legal agreement that's drawn-up by a lawyer to ensure a clear understanding between all parties on the objectives.
Personal contacts, even family relatives may help get your startup business off the ground and propel it to grow. Although, a clear understanding should be thoroughly discussed that only 3 out of 10 startups make it past 3 years. The truth is that most startups fail. But the ones that do make it can transform the entrepreneur into a millionaire. Make sure you have regular meetings with the personal contacts that gave you money in order to update them on what's going on with the business. Be careful not to destroy friendships over money disputes.
Venture capital is another possibility but often requires extensive diligence, background checks and complex legal agreements. VC will ask for significant equity stakes, but may provide board level advice and mentoring that can successfully guide your business and open doors to big time corporate partnerships increasing your chances of success.
Finally, alternative services like SCS Entrepreneur Business Program, enables anyone that creates a viable product or service to get sales and marketing assistance in exchange for a percentage of revenue. This is a unique program that does not require any upfront fees or expenses. It significantly reduces your risk of putting up front large sums of capital or taking on debt. The program primarily requires your sweat equity working in partnership with SCS. It's a great way to get started achieving your dream of creating a viable business.
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