How to Raise Capital For Your Business

Starting a business is an exciting, yet daunting endeavour; the thought of taking a concept or idea and turning it into reality is captivating but, in order to be a successful entrepreneur, there must be capital to back it up. Raising the required funds is a crucial step in the early stages of a new business, and it's important to understand the best ways to do this.

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Charles Kingsley Ajeigbe, Maptech Limited.

In this blog, we’ll

Explore the various methods available to entrepreneurs aiming to raise capital for their business, from traditional banks to venture capital firms.

Many business ideas die at the incubation stage because of lack of capital to finance the fluttering start up. Have you asked what other sources are available for raising enough capital for the growth of your business?

Here’s an overview of typical financing sources:

1.  Personal investment

2.  Love money

3.  Venture capital. …

4.  Angels. …

5.  Crowdfunding. …

6.  Business Incubators. …

7.  Grants and subsidies. …

8.  Loans.

1.  Personal investment. When borrowing, you invest some of your own money—either in the form of cash or collateral on your assets.

2.  Love money. What Is Love Money? Investopedia defines Love money as “seed capital that has been extended by family or friends to an entrepreneur to start a business venture. The decision to lend money and the terms of the agreement are usually based on the relationship between the two parties, instead of a formulaic risk analysis”.

3.  Venture capital. Venture capital (VC) is a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential. Venture capital generally comes from well-off investors, investment banks, and any other financial institutions.

4.  Angels. Popularly called Angel Investors. Business angels are private individuals who invest in businesses from a purely business-related perspective. They’re often referred to as private or informal investors. With a good business plan and cashflow analysis of your business, the business can attract and receive good capital from this source.

5.  Crowdfunding. Crowdfunding is a form of fundraising where a business asks the public for a contribution, usually in exchange for equity in the company. Crowdfunding usually entails a private company asking large numbers of people for small contributions.

6.  Business Incubators. Wikipedia explains that “Business incubator is an organization that helps startup companies and individual entrepreneurs to develop their businesses by providing a fullscale range of services starting with management training and office space and ending with venture capital financing.”

7.  Grants and subsidies.

Grants are sums that usually do not have to be repaid but are to be used for defined purposes. A grant is a gift to an individual or company that does not need to be paid back. Research money, education loans, and stock options are some examples of grants.

Subsidies, on the other hand, refer to direct contributions, tax breaks and other special assistance that governments provide businesses to offset operating costs over a lengthy time period. Have you explored the possibilities of your business benefiting from either grants or subsidies?

8.  Loans. One of the most common ways to raise capital for your business is to take a business loan. A loan is also a better source of capital for a profitable business in comparison with the share capital as you can have a better leverage. You enjoy the surplus of rate of return over the interest you pay for the borrowings. A business loan is borrowed capital that companies apply toward expenses that they are unable to pay for themselves. Some business owners use business loans to pay for salaries and wages until their new company gets off the ground, while other companies put borrowed funds toward office supplies, inventory or business projects.

The above is not the complete means of raising capital for businesses.  Stay tuned for a continuation wof this expose in subsequent posts.

Charles Ajeigbe

Charles Ajeigbe

Director Business Development/Lead Consultant

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