7 Common Ways to Raise Funds for Your Business

Regardless of the nature of your business, raising funds can be a challenging and stressful process. Potential investors may put the strength of your books, your brand, and your story under the microscope. That’s why it’s a good idea to be prepared for different types of fundraising methods to improve your chances of success:

#1 Big Banks

Traditional banks are the most common option for securing a sizable long-term loan for your business. A bank will look at conventional metrics such as your cash flow, financial outlook, assets, and business credit report. Big banks aren’t typically easy to secure loans from because they’re risk-averse. Additionally, even after approval, banks may take weeks, if not months, to provide the funds.

#2 Online Lenders

Unconventional online lenders offer short-term loans, long-term loans, emergency bridge loans, etc. They don’t use conventional metrics and approve applicants more quickly for funding.

However, online lenders aren’t usually as trustworthy as big banks and may hide predatory terms and conditions in contracts. For example, they may offer seemingly good merchant cash advances based on high interest rates that trap businesses in debt cycles.

#3 Equity Capital

Private companies that go public can offer shares to potential stakeholders to raise capital in exchange for some control and voting rights. While there have been many initial public offering (IPO) success stories, the biggest of all time is Alibaba Group’s $25 billion in 2014.

When raising capital, your company should develop a strategy to attract investors by working with an investor relations (IR) tools and solutions expert that offers intelligence, design, and important products like IR websites, customer relationship management (CRM) software, and more.

#4 Crowdfunding

Crowdfunding platforms such as Kickstarter are an excellent way to raise funds for your business if you have an exciting idea. Established companies also use crowding funding tools to generate capital for compelling new products.

#5 Venture Capitalist

A venture capitalist (VC) company specializes in funding businesses with investment collected from large corporations. Here are some advantages of securing VC funding:

• Their funding is usually considerable and can help you scale rapidly.
• VC funding is not a loan. If your venture fails, you don’t owe anyone money.
• They share knowledge and insight to help you achieve success.
• VC companies can connect you with other thought leaders in the industry.

#6 Angel Investors

Angel investors are individuals looking to invest in an upcoming company in exchange for equity or convertible debt. Not all angel investors are accredited. Additionally, angel investors can be a bit more unpredictable than a VC company. For example, an angel investor may demand to have some input in your day-to-day operations.

#7 Family and Friends

Many entrepreneurs started companies with investments from family and friends. For example, Jeff Bezos secured an estimated $300,000 from his parents for his online bookstore idea. Of course, Amazon is worth $1.7 trillion today, only behind Apple as the most valuable company in the United States.

There are many funding options to choose from, each with its set of advantages and disadvantages. Pick the right choice for your company to secure its future.

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