5 Ways for How to Raise Capital for Your Business

Personal Finance

Aug 29

Written By

Raising capital for business can often be one of the most difficult, stressful, and frustrating parts of starting your business. The average business takes six months to raise capital.

But, this can be done in many different ways, and some of those ways require more personal sacrifice than others.

So, which one is best for you? These are five ways for how to raise capital.

1. Friends and Family

This is probably the first one a lot of new business owners think of if they know someone close to them that has the money and willpower to invest.

Be warned; it can be risky to mix business and money with deeply personal relationships like this because this has a way of ruining that if things go wrong.

You may want to think carefully if you want to ask people you are closest to for money that you may not be able to hold onto. But, if you guys can work through it, these are the people likely to believe in you and support you the most.

2. Crowdfunding

This has become a popular option for people to raise money for both personal reasons, life emergencies, and even startups. The beauty of this is if what you are asking for catches on well enough, then you can have hundreds of thousands of dollars with this method very quickly.

Crowdfunding is a way for strangers that are either empathetic to your situation or believe highly enough in your product to financially support you. This usually relies on a big group of people giving a small amount for donations with a specific financial goal in mind for money to raise.

3. Investors

An investor is someone that usually has a large amount of money and business experience of their own to be able to financially support a startup.

You can meet these investors by networking or persistently seeking people to pitch your idea to. However, in exchange for the capital that an investor will give you, they will usually require a certain percentage of shares in your company for them to own.

4. Loans

If you do not like the idea of giving up a percentage of your business, loans may be a more appealing option for you. Small business loans are available for startup businesses at around a 5% interest rate.

So, raising initial capital for a business might require you to pay $105,000 back for the $100,000 that you take. You have to work on regaining that capital, but you still keep your entire business.

5. Personal Assets

Finally, if you have exhausted all options or just simply do not like operating on interest or selling percentage, then you may be best sticking to your personal assets.

Most do this, as 77% of new business owners rely on personal savings. You can use personal savings, liquidate your house, sell stocks, sell a valuable possession, and more.

But, personal assets allow you not to have to rely on anybody else except yourself. However, you are the one taking all of the risks.

Learn More on How to Raise Capital

These are just five ways for how to raise capital. Do any of these appeal to you? Do you want to find out even more about raising capital?