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How to Raise Capital for a Small Business

By Aveek Pal Chaudhuri

Raising capital for small business is one of the methods to become a successful businessman. If you go by the stats, you will find every businessman is seeking ways to gather finances. But gathering finances solely depends on the nature and type of business. With a well-structured business plan that states the mission, business goals, and related business expenditures help in the way of securing funds.

There are some traditional ways and some innovative ways to do it. Let’s read some of the main ways to do it.

  1. Funds from Friends – Close friends are always there to help in the bad times. So, borrowing money for a holistic purpose like starting a small business never creates a bad impression. With the promise to return the borrowed amount with interest and within a fixed time, can prove to be beneficial for you and your friends.
  2. Gather Funds From Angel Investors – It is always the sorted way to gather funds from angel investors for small businesses. Out there are some of the rich individuals that are willing to put their money on the line to make your business successful. Angel investors help every aspiring entrepreneur to start from zero, provided they have a perfectly drawn business plan.
  3. Asking Help From Family – To raise money, you can ask your family members to contribute for your business. They are always supportive and even they can get involved in the business and make it a successful one. The good thing is even without a proper business plan, you will be able to get cash in hand for your business from your family members. While the amount collected may not be enough, but surely it will give you a start.
  4. Private Investors – It will become an everyday matter for you to deal with private investors if you want to be in the business. You can contact them to raise capital for your business and out of their own will they will pay out the money with a hope to make profits in return. They are professional beings and years of investing experience. Therefore, make sure your business is profitable and have success potential.
  5. Venture Capitalists – A great way to secure funding yet one of the hardest ways. Venture capitalists set very strict terms before making any investment. As stats suggest, there have been very few businesses that have seen money coming from venture capitalists. The businesses that have been successful in gathering funds from venture capitalists also witnessed their business getting operated by them. So, if you find finances from them, be ready to take sound business advice from them. They are useful and success making advice, but they will also take return on the investments they made.
  6. Bank Loans – It is a mainframe model of gathering funds. Almost all the banks are happy to offer loans. They ask for business plans, revenue sources and entire expense plan before sanctioning loans. They have a set of rules and criteria for loan returns.
  7. Institution Supports – If you search, you will find specific banks that are granting loans to entrepreneurs. You can go and present the business plan. If it’s profitable, the entrepreneurial bank will help you with the money. They grant loans on longer payback periods.
  8.  NGO Supports – There are many NGOs that are stepping in nowadays to support small scale businesses. Though they are not able to assist directly with finances, yet they guide business in the right direction for money generation.
  9. Invest Your Savings – This is the best way to start your business by putting all your savings in one place. If you don’t levy on others, then this is the right way to start your business.

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