How to raise money to start a business
1. Crowdfunding
Use the power of the internet to raise the funds you need. Crowdfunding platforms like GoFundMe have become increasingly popular with inventors, entrepreneurs, and the general public in recent years. They’re easy to set up, and if you can communicate your passion in your fundraiser story, you may be able to generate support from potential investors all over the world.
Moreover, you can ask friends and family to contribute to your crowdfunding efforts. People you know are often the best and safest way to raise money. Not only will they be more open to your proposal, but they have also likely seen your effort and dedication to your business.
2. Angel investors
Angel investors, often high-net-worth individuals, provide capital for a business start-up in exchange for ownership equity or convertible debt. Many of the biggest tech companies today, like Google and Yahoo, were funded by “angels.” Looking for a way to raise money for a business that already shows signs of growth? Angel investors are a great option.
3. Bootstrapping
If you don’t want to give up any form of ownership or independence, bootstrapping is likely the best option to raise money for a business. It involves using your own money, such as savings, personal income, and reinvesting funds.
4. Venture capitalists
Where private equity focuses on established businesses, venture capital involves investing in companies that show high growth potential, usually start-ups or early-stage companies. Venture capitalists receive equity in the company and hope to make considerable returns on the investment as the company grows. Venture capital firms typically raise money from high-net-worth investors and pension funds.
5. Microloans
Microloans are designed for small businesses or individuals who may not qualify for a traditional bank loan, but want to borrow money for their venture.
Microloans tend to be for smaller amounts and carry higher interest rates than traditional bank loans. So do your research on repayment terms to decide which small business loan option is best for you.
6. Small Business Administration (SBA)
Government programs are a channel worth investigating if you’re asking yourself how to raise funds for business growth. You can turn to the SBA grants programs, but keep in mind that they are highly competitive. Another way of raising money for a business through government assistance is through SBA lending. However, it’s important to note that interest rates are slightly higher than most banks.
How to raise funds for a growing business
If you’re looking for how to raise money for business growth, explore the following options:
7. Purchase order financing
Purchase order financing is perfect for businesses that have large product orders coming in regularly but not enough cash flow to cover the production of products until the payment from the customer comes through.
How it works is that a purchase order financing company will pay your supplier the cost to produce the product. When the product is made and shipped to your customer, your business then invoices the customer and receives payment. That payment is then used to pay back the purchase order financing company. While it’s not the most affordable way for a business to borrow money, it is a viable option for those who aren’t able to qualify for cheaper financing to fulfill an order.
8. Contests
Business contests are competitions that offer investment or financial support as prizes. These are a great way to get funding because the prize money comes with very few conditions, if any at all. Contests usually encourage creative businesses or social enterprises to take part.
9. Product pre-sales
Borrow a page from big names in tech and offer customers the option to pre-order products before they launch or hit the shelves. Not only does this raise the money needed to fulfill these orders, but it also offers companies a way to gauge the demand for their product.
10. Strategic partnerships
Strategic partners come in many forms, from suppliers to distributors, and even customers. While it may not be direct funding, getting credit from your supply chain can help supplement your budget until your business is in a good place financially.
11. Incubator programs
Business incubators are programs created to provide new businesses access to the resources they require to grow, particularly during product development and customer acquisition. Incubators benefit businesses more than just financially. They also offer mentorship, network establishment, marketing strategy advice, and relevant entrepreneurship training.
Best practices for raising money for a business
Whatever your business model, there are some best practices all business owners should follow.
Always practice due diligence
No matter what form of fundraising you do, always make sure you practice due diligence to make sure you are not getting the raw end of the deal. This is especially so with financing, venture capitalists, or angel investors.
Ensure that bookkeeping is organized
Always make sure to do proper bookkeeping, whether you’re a small business or bootstrapping. The first thing financial lenders or investors look at is whether a company’s books are in order. You need to be able to show financial projections for the future, too, to show investors or financiers the full picture.
Fine-tune your business pitch
Refine your value proposition in your business pitch. Donors and investors want to know your impact and how their money will help you achieve it. Make sure to showcase the things that make your business unique.
Use creativity for fundraising
Get creative with your fundraising efforts. Like in a business deal negotiation, it’s about much more than simply asking for an amount of money. Likewise, think outside of the box when exploring fundraising options.
Share your enthusiasm
Express your passion and get your audience excited, especially when crowdfunding. Use social media, email and word-of-mouth to spread the word about your business.
Raise more money with GoFundMe
Grants and loans can take weeks or months to be approved. But with crowdfunding, you can get the financial assistance you need for your small business within just a few days. Are you ready to raise funds for your business? Sign up and start a fundraiser today.