FRANCHISE HERALD
Monday July 13, 2020

updated - July 13, 2020 Monday EDT

Seven Ways of Raising Funds for Your Business

Jan 04, 2020 12:51 PM EST | By Staff Reporter
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Seven Ways of Raising Funds for Your Business
(Photo : Unsplash)

As an entrepreneur, trying to start, run, and grow a business can be filled with many different hurdles. Chief among these challenges may be funding, or, more precisely, the lack of adequate funding. You need funding to launch a new business and even grow an existing one. Lack of sufficient funding is such a common problem that it accounts for 82% of small business failures.

Before starting a business or trying to expand an existing one may be by launching a new product or stretching into new markets, you need to have already worked out how much money you need and how to source it. Sourcing business funding can be challenging, but here are seven unique ways of raising funds for your business.

Personal Financing

Personal financing should be the first option you need to explore. Before you try borrowing, raise as much money as you can by yourself. You could tap into your 401K account or withdraw from your personal savings accounts. The good thing about personal financing is that there are no associated risks since you don't necessarily have to pay yourself back. Plus, there are no strings attached, such as interests, fees, and contingencies.

Venture Capitalists and Angel Investors

Many venture capitalists and angel investors are looking for investment opportunities in both established and upcoming businesses. Mark Stevens is one such investor with a keen eye for lucrative business opportunities. In his diverse investment portfolio, Mark has helped many entrepreneurs overcome their financial hurdles and realize their business potential.

Investors will generally provide you with a line of credit, or ask for a small amount of equity in your business or a royalty agreement in exchange for the money. Investors are excellent sources of funding; some even go on to provide valuable insights and advice along the way.  

Crowdfunding

Crowdfunding has become very popular with small business start-ups nowadays. There are several online crowdfunding platforms with Kickstarter leading the pack. The various platforms have different regulations and procedures governing crowdfunding campaigns. But with most of them, the basic premise is the same.

The goal is to raise funds from people's contributions from all over the globe. On your part, you might need to incentivize the funders by making generous promising such as offers, discounts, and pre-orders contingent on reaching your funding goal.   

Family and Friends

Your friends and family members might also be able to assist your business financially. Approach some of the people who are financially capable of funding, have your best interests at heart and would be willing to support your business and ideas. It's up to you to structure the refund agreement depending on your relationship with these people. Although it might be odd to involve your friends and family in your business' financial matter, you can still raise a decent amount of money. Just be careful not to jeopardize valuable relationships over money.

Pre-Sales

Launching pre-sales for a new product or service release is another great way to make some extra cash to fund the actual release. Some game developers, software vendors, carmakers, and electronic manufacturers often use the pre-sales strategy to raise money for market penetration or finalize the launch of their new products.

Pre-sales not only raise funds but also helps promote the product and spread brand awareness at a critical time before launch. Plus, pre-sales give you a glimpse into the market, helping you predict the product's projected performance so that you can optimize things like inventory and marketing strategies.

Business Loans

Business loans are one of the most explored options for business funding. There are several different organizations and even individuals who offer business loans, including banks, private lenders, and a variety of financial institutions. Although there are specific standards to business loans, vendors may have unique terms that vary widely across the board. So, shop around before taking a loan and make sure to read and understand the lending and repayment terms to avoid complications. Also, ensure that the loan aligns with your business's financial capacity. 

Vendor Financing

Vendor financing involves negotiating with your vendors, contractors, or manufacturers for favorable payment terms, especially if your ability to pay directly depends on sales. If your vendors agree to a longer or more flexible payment plan, then you'll have more cash to cycle through your business before having to pay for expenses.

It's not an ideal funding solution, but it works for specific business models. Plus, it relies heavily on your negotiation skills and your business relationship with the vendors. But, vendor financing can be an excellent way to soften some of the business financial burdens during tough economic times, for instance, during low sales, natural disasters, or internal challenges.

It might not be very easy to find sources of business funding that give you the exact amount at the time of need. So, it might be necessary to combine a few different sources of funds to help guarantee funding stability and financial security.

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