Capital is the amount of money that a business requires to begin running its operations from the onset. One of the biggest challenges of small-scale entrepreneurs is to raise capital for their business. One needs to have patience and a lot of determination. Nevertheless, there are some ways in which one can be able to raise funds with ease. Before beginning any business, it is important to work with a business plan that will guide the amount of money needed. Here are some ways on how to raise capital for small business.
How to raise capital for small business
1. Get capital from trusted friends
Friends can be very instrumental in helping you raise capital for your business. The best approach is to ensure that they either benefit from the business or there is a laid down structure for them to recover their money. This can be done by paying them with interest after the business has stabilized or made friends to be shareholders in the business. Always remember to be transparent and honest with your friends if you decide to use this method.
2. Angel investors
Angel investors are rich business persons who have a special interest in funding entrepreneurs accomplish their business goals. This type of investors may need to be convinced that the business is viable before they can fund you. Your business plan must have comprehensive laid out structures that will prove that your business is profitable and accounts for the capital that you demand.
3. Funds from family members
Many people are usually quick to dismiss any form of funds from family members. However, most family members will be willing to fund a good business idea even if you are not in a position to write a good business plan. The money you get from family members may not be sufficient but can be useful when you have tight investment timelines.
4. Funding from private investors
Private investors usually target businesses that have prospectives of a good return on investment. They are professionals who have experience in the business field. Apart from funding, they can also offer expert advice on the best way to run the business. Seeking help from private investors is one of the best ways to go if you are thinking about long-term business. However, it requires one to do a comprehensive business plan that is convincing to the investor.
5. Bank loans
Most of the successful small-scale businesses have depended on bank loans at one stage of their progression. This is the most common source of funding for small business. Most banks will be more than willing to fund your business provided that there is no problem with your credit history. All they need is surety that the loan will be paid within the stipulated time frames. One should, however, be keen on the interests charged to avoid making losses in the end.
6. Non-governmental organization
Non-governmental organizations have been very instrumental in raising funds for small businesses. Although the funding may not be direct, they may be able to give you guidance on where to get the right resources to achieve your business goals.