10 ways to raise startup capital for your business – Freddie Achom
Today, if you interview people randomly why they have not implemented their business ideas into a successful Business, a significant portion will likely have a similar response: They lack capital or cite inadequacy of funds. Nevertheless, lack of funds should not be an obstacle to your entrepreneurship as there are sources of capital an individual with a start-up business idea can explore.
In this article, we shall explore ten ways anyone can raise funds to turn their ideas into a real business. The funding tips were extracted from British entrepreneur and investor Freddie Achom, who is the founder of Rosemont Group Capital Partners. He is also the founder of Rosemont Group Foundation, an initiative designed to empower young people in business and their professional careers.
Here are the ten funding options to raise capital.
1. Bootstrapping your Start-up
Bootstrapping also referred to as self-funding, should be the first option to fund your business ideas especially if you are starting out. You need to save a reasonable amount of money from whatever source you earn a living in order to raise the capital for your dream start-up.
Usually, it would be easier for you to convince investors, family members or even banks to give you a loan if you have injected your hard-earned money into your business as it is the only way you can showcase that you have faith and confidence that the business is worth your capital. Whatever you earn at present, save something for your investments as it can even attract more capital.
2. Try Crowdfunding
Crowdfunding is the newest means of raising capital for start-ups and it is becoming the most popular strategy thanks to the spreading of the internet, which has taken crowdfunding to a new level.
It works in a simple manner. As an entrepreneur, you need to present your business proposal-including goals, funding required among others- to a “crowd”/or potential customers by posting it on a crowdfunding platforms. Potential consumers/investors will review your product, and then if they believe or are interested in your ideas, they will make pledges or support your business financially. Some of the common crowdfunding websites include Indiegogo, Ketto, Kickstarter, and GoFundMe among others.
3. Get Funds from Business Incubators & Accelerators
These are programs found in various cities and their core mandate is to nurture new businesses by providing training, networks, and shelter tools. Incubators and Accelerators are like “departments” working together: Incubators assist in bringing up the business whereas the latter helps in fast-tracking the business towards success as the name- “accelerators”-suggest. So, as an entrepreneur, consider this option.
4. Raise Funds by Joining Business Competition
The number of competitions organized every year to support and encourage start-ups would surprise you. Microsoft BizSpark, Lets Ignite, and even Governments programs are some of these entrepreneurship competitions. Participating in these contests is simple. First, make sure that your business plan stands outs. Present your ideas in a simple and convincing format. By doing so, your chances of winning the competition increases. You will also get extensive media coverage.
5. Get Angel Investment
Angel investors are typically people with surplus money and are willing to invest their cash in start-ups, but of course in return for an ownership, which can be up to 30 percent.
Usually, angel investor/s offer mentorship to new businesses alongside the funds they pump into your business. Some of the most notable and successful companies that are established because were supported by angel investors are Google and Alibaba among others.
6. Get Venture Capital
Venture capital funds are professionally managed and accessible to companies with a huge and promising return on investments (ROI)-these include businesses that are past start-up phase. As said earlier, saving for your investment is a stepping stone to having access to such funds.
Venture Capital invests in the start-up in exchange for equity and normally exits upon acquisition of the company. A good thing about venture capital is that they provide expertise and mentorship.
7. Apply for Bank Loans
Banks provide two types of loans: Capital loan and funding. The capital loan is needed to run operations that generate complete cycle of revenue, but the limit is determined by stocks and debtors whereas securing funding from bank involves the normal process whereby you have to present your business plan as well as providing a detailed valuation.
Unlike established businesses, it may be a challenge for a start-up to qualify for capital loans as this suit companies that have proven their operations are profitable. So do we say that there are also obstacles in receiving funding from banks? Of course not. Packaging your business proposal in a way that high risk of failing are reduced will get you funding from the banks.
8. Get loans from Microfinance
It is undeniable that banks are more interested in businesses with low risks and that is why it is difficult to get loans such as Capital if you are a start-up. However, you may also get loans from alternative sources such as microfinance.
In fact, microfinance is in place to offer financial services to those who may not have access to bank loans. They do not have stringent policies such as having good credit ratings. Without doubt, microfinance fits the bill for start-ups.
9. Government Programs that Offer Start-up Capital
Most governments, if not all, around the world have various programs that support start-ups. They set aside funds accessible to all upon meeting certain qualifications. The requirements for qualifications may differ and therefore, you may have to know the government initiatives that may be suitable for your business ideas.
- Other ways of Raising Funds for your Business
Product pre-sale: Deliver your product to the market ahead of your official launch. This is a better way of improving cash flow and above all, assessing the market. You will get to know the demand of your products.
Credit Card: It is a quick way of getting instant funds. Simply put, use a credit card to access funds and keep on paying the minimum instalment.
Selling Assets: This is not the right way, but it enables you to raise funds to meet your short-term financial needs. Once you overcome your financial challenges, you may acquire a new asset similar to what you sold.
As seen, it is not only well-established businesses that have access to capital to pump into their operations to boost their returns, but there are also various sources of capital available for start-ups business.
Official website – Freddieachom.com
Link 2 – Rosemontgroupfoundatiion.org