According to the Small Business Administration (SBA) in the US, there were over 27 million small businesses in 2010, with a majority (over 75 percent) being owned by a single owner.
The internet has become a great influence in the business world. Anyone with a computer can start a money-making business online with no technical and programming experience. Even though it is possible to start an online business with no money, it will require you doing most of the work yourself, which could result in you making many mistakes.
When it comes to online business, the chances of success are low. It is estimated that half of online businesses survive for 5 years, and only one third survive after 10 years. Despite these odds, some mature and become stable businesses, and few like Apple and Google become legends.
Before beginning an online business and turning it into a legend, you first need to get some capital. It is estimated by the Ewing Marion Kauffmann Foundation that a new small business startup capital can average $30,000. Even though this amount can be higher, entrepreneurs today have various options of raising startup funds.
Here are 5 ways to raise money for your new business:
1.Self-financing:
Although this may seem easy, there is a big disadvantage: you’ll be entirely on the hook if the business fails. Despite this, self-financing your startup business is still an attractive option, and there are various ways of doing so:
- Using your personal savings: whether the money comes from your personal account or an inheritance, using your own money could show how committed you are to your potential investors.
- Selling some assets: you might own a real estate, bonds or stocks that you are willing to sell to finance your business. Ensure to take into account the tax implications of doing so.
- Using your credit cards: this can be a quick and simple way of buying things you need to launch your business. Put into consideration the huge interest rates for unpaid balances.
2.Funding from family and friends:
If you are unable to raise funds on your own, you can turn to people closest to you. It is easier to convince your family and friends than it is to convince bank officials you don’t know.
Also, they are more flexible when it comes to repayment terms or interest rates. However, this can be risky, particularly if the business fails. That will most likely affect your relationship with them.
3.Venture capital
These firms can invest in a business with the promise of equity stakes in the business. Because of this, venture capital firms mostly invest in businesses that have already been established and are doing well.
4.Crowdfunding
Since the 1990s, businesses have made use of the internet for marketing. However, over the last ten years, the internet has also become a good source of getting capital.
In order to successfully get funds from crowdfunding websites, you need to gain the attention of prospective donors by having a good pitch for your company. Also, you’ll need to promise the donors something in exchange for their funds.
5.Peer-to-peer loans:
In this instance, a borrower will not need to go to a traditional bank or an investment company to ask for funds. All he/she needs to do is post a loan request on a P2P platform – like Prosper or Lending Club – stating the amount needed. Potential investors then donate various amounts until the goal is reached.
Final thoughts:
Unless you already have the desired funds, getting capital to fund a new business require serious planning and hard work. You must consider the benefits and disadvantages of each potential funding source, and choose the one most suitable for you.
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