9 Ways to Raise Funds for your Business

• Cutting costs is as important as raising money.
• Try to free or low cost funding options first.
• Options that require no monthly payment while you're getting started are less risky.

Building a business is not easy, it takes great leadership of people, precise resource management, the compliance and regulations tight rope act, and to add to it you put money into your business before you can take any out.

It can be incredibly difficult to meet all these requirements, but a talented entrepreneur can definitely do them. All the talent in the world can’t help you, however, if you don’t know where you’ll get the money from.
Most people who are going out to start a business don’t have tens of thousands of dollars on hand to put into a business. If you do, or you can generate a lot of cash through other means, bootstrapping your business, or funding it with your own cash, is a better option than raising capital in most cases. But assuming you don’t have that option, it is vital to know the different ways you can raise capital for your start-up. But before you even think about raising money it is important to know what you’re going to use that money on.

Saving Money is as Good as Raising Money

If you have a complex business plan, a good place to start is reviewing your plan to see where you could cut costs. How could you get your supplies or labor at a discount? Where is the waste in your business? Etc.
How much money you spend to operate your business is called the burn rate. Having a lower burn rate will allow your business to operate longer without needing additional investments and hopefully make money in the process. For example, instead of opening your own office, you could participate in a business incubator program to take advantage of the lower overhead costs they offer for start-ups.

That doesn’t mean you should do everything yourself. Employees are vital to a successful business, and often the best choice is to hire someone to do a job that you could, but don’t have to, so you can focus your energy on activities that will make more money.

9 Ways to Raise Funds for your Business

There are many ways to raise capital for your business, but not every option is available to you or even good for your business. These options have been roughly ordered by how risky they are, which needs to be considered when you’re starting your business, but keep in mind that any loan is risky.

1 Pre-Sale

One of the best ways to raise funds for your business is to get it directly from your customers. If you have a product or service in mind but aren’t sure it will be successful, you can create a pre-sale campaign to gauge interest. If your potential customers vote for your product or service with their money, then you know you have a viable product or service and you have the funds to make or deliver it with almost no risk.

If your business model allows for a pre-sale this is one of the best options available for raising funds for your business.

2 Grants

While not applicable in all situations, some businesses can apply for grants to get started. Established businesses or organizations have business contests or applications to give money to other businesses or organizations. If you meet their requirements this is one of the best ways to make money because it is often given with no strings attached. Filling out applications is time-consuming, however, and it isn’t as guaranteed as a loan, so don’t spend all of your time doing this. The Small Business Administration (SBA) grants are a great place to start for this.

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3 Networking and Strategic Partners

While networking isn’t directly asking for money, it is an important part of raising funds for your business. You never know what the person you talk to will know. That’s why it is so important to talk to a lot of people, especially other entrepreneurs. This can help you find strategic partners who can help you get off the ground with minimal costs. Even becoming connected with a local chamber of commerce can give you access to discounts and more from banks or local suppliers.

4 Equity Crowdfunding

If you aren’t looking to get a huge debt service payment, equity crowdfunding might be an option. Since someone looking for equity in a growing company isn’t looking for immediate cash flow, you can get an influx of cash without paying monthly interest or accruing interest throughout the process. Investors who are looking to invest in equity crowdfunding are looking for a good business pitch, so yours had better be solid.

5 Crowdfunding

Crowdfunding is a great way to get money into your business quickly because there isn’t a huge application or review process to get funds fast. Keep in mind, however, that if you don’t take the equity crowdfunding route, you’ll probably need to make payments on the loan and rates can be high because it is risky for investors.

6 Small Business Administration (SBA) Loans

If you decide that you need a loan to build your business, one of the first places to look is the SBA. The SBA offers competitive rates, longer terms, and overall cheaper money to small businesses. If you can qualify for an SBA loan, that is the way to go. Most banks can help you get an SBA loan.

7 Bank Business loans

If an SBA loan is not an option, then a bank loan is another option. If you’ve built a relationship with a certain bank, then you can potentially get very generous terms on a business loan. Some people even use personal loans to start a business but keep in mind that any personal recourse loan in your name will stick with you, even if your business fails.

8 Angel Investors

An angel investor is a person who has a lot of money that invests in small businesses. To meet angel investors, you need to do networking. Angel investors will often require large amounts of equity or cash flow from the business once it is up and running, but if they are patient enough, you can often get through the start-up phase using their money without paying monthly payments to them. These are great investors to bring on, but since it is an agreement between individuals, it is vital to have a good lawyer involved in writing the contract.

9 Venture Capital

Lastly, there is venture capital. Venture capital is much like an angel investor except the investor is a company. If you can get venture capital to invest in your business, that is a good vote of confidence that your business will succeed. However, there is a lot of potential to lose your business if you don’t perform so this is a very high-risk option.

The Money Wrap Up

Raising money for a business takes a lot of effort. You need to be ready to hustle hard and trade either cash flow or equity in return for the funds to get your business off the ground. The best option is to always start with the lowest risk. If you can bootstrap your business without getting any financing, then you will be in the strongest position when your business finally gets rolling. If that isn’t an option, then grants and low-cost funding options should be pursued next. Once these are exhausted, you can look into higher cost and equity sharing options. Whatever option you take, remember that the goal is to get your business profitable with the least amount of cashflow or equity given up.

What is the best form of funding for your business? Comment Below.

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