7 Ways to Raise Capital for Your Business

What is capital?

Here's what we need to keep in mind. 1. Perhaps you have a great business idea that you would like to implement. 2. You already have a business that you would like to expand. Regardless of the route you take, you need money to buy additional resources that will generate more revenue for your business. The difference between money and capital is that the latter (capital) is used to create wealth through investing, whereas money is used primarily for short-term consumption. Purchasing additional resources will yield a greater return on your investment.

How do I obtain this capital.

There are 473,900,000 hits when you search "How to get money to start a business.". Of course, there are numerous answers to that question. Here are a few of the most widely acknowledged and common ways to raise capital.

1. Yourself

In order to get their business off the ground, founders usually invest some money themselves. You might use either your savings or income from a regular 9-5 job. Is it possible for you to find a way to get extra income from a side project each week?

2. Friends and family

Despite how easy it might seem, we don't recommend this option. There is always some risk associated with a business. You may have been a bit off with that great idea you had. If, God forbid, your business idea doesn't work out and you end up going bankrupt, your close friend might put you in an extremely uncomfortable position. 

3. Venture capitalists

Venture capital - what is it? Venture capital (VC) is a form of private equity provided at an early stage to an emerging firm with ample potential for growth. You've probably seen the VC abbreviation in more than one Wall Street movie. Investments in venture capital have high risks, but also high returns. What are the downsides? Venture capitalists seek rapid growth of their investments in order to make more money when selling the business (usually through an initial public offering).

4. Angel investors

Angel investors are the opposite of venture capitalists. It is a wealthy individual investing more in you as a person than the viability of your business. They are using their own money instead of that of a venture capitalist, who is usually managing funds from investors. How does the angel investor benefit? Usually through ownership equity or convertible bonds.

5. Bank funding

Bank loans for startups and/or planned businesses are a traditional source of funding. Your bank will carefully review your personal credit score, your time in business, your business plan and more to determine how likely it is that your business will generate revenue, and whether the loan can be repaid. A bank loan is gradually repaid with interest. A certain percentage rate is usually applied to the amount borrowed as interest. What is one of the main advantages of taking out a bank loan? In contrast to financing through investors, you are not giving your business away.

6. Crowdfunding

In crowdfunding, a large number of people contribute small amounts of money to a project. You may wonder what the "donors" gain from this. The answer is everything from free samples to advanced products. For start-ups that want to avoid relying on venture capital investors, equity-based crowdfunding has become an attractive option.

7. Cash advance

Cash advances are typically short-term loans from banks or other lending institutions. They are often a good choice for businesses that have been in business for a while. The payback depends on credit card volume. Furthermore, it's important to note that a cash advance is not a loan as such, rather it's an investment in the future sales of your credit cards.