Raising money for a small business

Every entrepreneur has unique ideas and is constantly finding different ways to make people believe in those ideas. Every unique business idea comes with BIG risks: risks associated with finance, manpower, technical know-how, industry experience and government regulations.

Small Business setup involves careful planning and financing a small business is by far the most challenging obstacles an entrepreneur has to overcome when starting a new venture. Most start-ups require at least a small amount of seed money to get started, and typically not everyone has that kind of money to invest. Unfortunately, there are few that actually reach the stage of successfully convincing investors to fund their idea.

Here are five possible ways to raise money for your small business:

Crowdfunding: This has become one of the most popular ways to raise money for a small business. In simple terms crowd funding is collection of finance to initiate a business idea from a large pool of backers—the “crowd”—usually made online by means of a web platform. Crowdfunding on websites like Kickstarter, Indiegogo and others that are geared more toward small businesses can give a big boost to the financing aspirations and also help in develop their brand. A well prepared business plan is a critical prerequisite for crowdfunding.

Angle Investors: An angle investor or angles are basically affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. The main advantage of an angel investor is that you have a friendlier atmosphere and a quicker decision-making circumstance for a smaller amount of dollars. Such angels are usually attracted to innovative and technology driven ideas. Angel investing generally takes place at a very early stage of the start-up, thereby acting as an “angle” to the small business aspirant.

Home equity loan: Home equity means your current home’s value minus what you owe to the bank. Such home equity loans are a great option for financing a small business. These loans generally offer interest rates that are both flexible and lower than traditional commercial rates; however every country has different rules for such loans.

Venture capitalists: This option is more suitable for entrepreneurs that are beyond the start-up phase and already have revenues coming in. The most important benefit of venture-capital investors to a start-up is that they can help them get extra money and provide them with professional management expertise. Venture Capitalists or VCs generally look for quick ROI (return on investment) i.e. they often look to recover their investment within a three- to five-year time window.

Friends & Family: Well, if all fails then the best option is to speak to a trustworthy family member or a friend. Someone you think could believe in your idea and help you get started with at least the seed money. Borrowing from friends and family presents some unique advantages, including low- or no-interest payments and avoiding the hassles of bank contracts. The best way to approach this option is to have a well-thought-out game plan, not to mention, you should always give the real picture and tell them about potentials risks if the business fails. This will help you build the trust and also pose you as a through professional.

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