5 Top Sources to Raise Capital for New Business Start-Ups

Start-up capital is the amount that entrepreneurs and proprietors use to run their new business activities or the required money to cover the new start-up business expenses. The expenses include hiring new staff, purchasing of building/office, new inventory, equipment, office supplies, licenses, Material to manufacture the product, Market research, product-market testing, Advertisement, and other vital things for new business.

While at the start, entrepreneurs do not know from where and through which source capital to raise because one wrong decision will lead to the failure of a start-up that may not have compensation. As different start-ups need another type of capital funding that matches your well-developed business plan. Don’t add all eggs in one basket, which is a bad idea to start a new business.

Having enough money is the key to a successful new business start-up and keep it in mind; take the correct decision while choosing the source of capital. Once you make a decision, you cannot change the destiny of your start-up. 

So, here is the list of top sources to raise capital to Start a Successful start-up business.

• Self-funding your start-up: 

Putting your savings into your idea and trying to cover the early stages of the business is the most relevant and practical idea to start your business journey. It helps you figure out how much you invested and how much you still need to proceed further. This self-funding is also known as bootstrapping of the start-up by investing your own money or taking help from the family and friends as they are the sources who might have sufficient capital and wish to have equity in your start-up. 

Choosing this source is beneficial and easy to raise funds without any complex formal procedures. But Self-funding or bootstrapping is only possible and suitable if you need a small initial amount for your start-up. 

• Look for Angel Investors in the Early Stages of Your Business: 

Angel investors or seed investors are private individual investors with surplus net worth. Angel investors also work in a group of specialized networks of investors. They are mostly retired, keen and experienced executives in the business world. These investors directly invest in your business without involving any third party. They always look for potential opportunities to invest their capital. But it is not that easy as it seems. It is hard to find them as they have a low profile which means you cannot see them without any high-profiled connect help.

 Angel investors put money in the initial phases of your start-up; you need to show them a standard portfolio and well-constructed business plan that convinces them that everything you present stands in their favor.

• Find venture capitalists: 

Venture capitalists are a group of individual investors who work in a well-known and well-established organization. They provide a considerable amount of capital with a list of formal procedures and promises. Venture capitalists (VCs) usually invest in successful businesses or those that are in their growth stage. 

Keep in mind that VCs usually invest in start-ups with an innovative or new idea and the potential to sustain high growth. They invest in a vast amount and expect a high return on their investment. Have rights to involve and manage your business practices, power of decision making even rights of electing boards of directors. VCs are the best mentor to guide you about business techniques to make it successful.

Don’t find VCs suitable for your new business start-ups? Don’t worry next source might be ideal for your start-up.

• Take a loan from a microfinance bank: 

The standard and easy way to raise capital for new start-ups is to establish or offer loans with a low interest rate. Their policies to pay back the loan are flexible to other banks that provide the same loan with a high interest rate.

You must know which microfinance or small bank is providing loans, carefully look at their different schemes, loan procedures, compare interest rates with other financing institutes and select which is suitable and flexible for you.

You might need someone as a guarantor because small banks provide start-up loans after the backup plan procedure.

• Go for Crowdfunding: 

Crowdfunding is the most unique and new way to raise capital for an entrepreneur. It is an internet-based platform where several individuals show interest in your start-up ideas. It works like taking pre-orders, loans, and contributions before starting a business by providing a detailed description of your start-up idea. 

However, to get the attention of crowdfunding individuals, your pitch about your idea must be strong. It must mention your vision, mission, objectives, and goals of your new start-up business. They want to know why you need their money and if their money is used relatively. So, provide precise detail and develop their trust in you. If you make a tiny mistake, they will offer the opportunity to someone else.

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