Capital raising strategies for startups – the top sources

Sourcing finance for a new start up can be very daunting or even very pleasant depending on the avenue that an entrepreneurs chooses. Every source of capital has particular advantages and disadvantages. Below are some reliable sources worth considering.

Crowd Funding – Crowd funding is a new and developing capital raising avenue.Crowd funding means that your project is funded by the public using their own personal funds.The business owner just needs to propose the business idea and people can then decide how much or how little they want to give.

Angel Investing – Angel investing derives its name from the act of established entrepreneurs who consider investing some of their wealthy in start-up businesses.This kind of investment brings other benefits such as sound business advise and connections. It is therefore a good idea to look out for angel investing networks.

Family and Friends – Family and Friends can be a good source of capital.The important thing on this one is to ensure that you don’t borrow money that they cant afford to lose. Put any lending agreement in writing with the terms clearly laid out even if its a friendly loan.

Credit Cards – Credit cards should be viewed as a temporary measure between getting your business started and obtaining other financing such as a bank loan.The interest charged on credit cards make them a bad option for long term capital.

Bank Financing – Banks are a reliable source of raising capital for small business.Small business start ups can even leverage on obtaining a loan guarantee by the Small Business Association before approval.

Second Mortgage – Second mortgages are also referred to as home equity lines of credit.These loans tap into the locked up equity you may have in your home.To calculate how much you may be able to borrow for a second mortgage take the value of your home and deduct the value of any outstanding mortgage.

Venture Capital – Those who are involved in venture capital are very keen to invest in early stage businesses with high growth potential. Venture capitalists normally receive equity in the business in exchange for funding it.

Business Partner – When looking and choosing for a business partner, you need to make sure that their own goals for the business are aligned with yours. It is a good measure also to have a buy-out agreement in place in case of a breakdown in the business relationships.

The above are the wide array of funding options a business start up can consider.

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