By Sharon Jones
A huge challenge for any aspiring entrepreneur is to get together the cash required to turn their dream into reality, often referred to as ‘start up capital’. Of course, the next phase of growing your business is equally challenging, but before you can grow you must first get started,
The term ‘capital’ in the context of starting a business, relates to the amount of money required to launch and grow your business from being an acorn of an idea into something tangible with traction.
Getting your idea off the ground is both an art and a science; yet there are two basic ideas when it comes to start-up capital; on the one hand it pays to be frugal upon launch, as whilst it can feel great to offer extra touches such as Personalized Receipts & Invoices there are many things entrepreneurs starting a business WANT but don’t need in the first few months. The first premise, therefore, is to keep your start-up costs down to a minimum on the rational basis that it’s easier to raise $10,000 than it is to raise $50,000.
However, on the other hand, the number one reason small businesses fail in the first year is down to them running into cash flow problems, and a significant proportion of those problems can be linked back to startups being underfunded and therefore not able to keep their head above water.
Raising capital is rarely an easy task, and for many entrepreneurs it can be a scary process that involves the drama of going before a panel of investors and being grilled about their business. This article provides three less terrifying ways to raise the cash you need.
GET A BUSINESS LOAN
The most traditional route for setting up a small business is to get a small business loan from a finance company such as a traditional bank. This is possibly one of the most easy, reliable, and independent ways of financing your business. You keep complete control of your company, as you aren’t having to offer equity to external investors, who each get a say in how your company is run - and convincing one person, is a whole lot easier than going around investor meetings.
FRIENDS AND FAMILY
If you have wealthy friends and family who are open to backing your business for a small incentive (such as interest on the loan or equity in the business) this can be a great option, as it will cost less and be easier to arrange than commercial financing; however, borrowing money from friends and family can be a very stressful experience that totally changes (and sometimes annihilates) friendships. It might be worth considering the potential strain put on your friendships should the business not turn out to be a success. One workaround is to create an event where your friends and family can attend, paying for their participation and raising money.
A recent trend in raising startup capital is that of crowdfunding; where you pitch your idea on an online platform such as www.crowdfunding.com and strangers can offer bits of cash to back your idea - but these ‘bits of cash’ can accumulate to several million dollars.
The core advice with Crowdfunding is to make it more about the story behind your brand and the value that you’re providing in the sense of your mission - rather than the bottom line financial forecasts. People want to be involved with something that can emotionally connect to, on this platform, not just something to invest in financially.