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Among the many challenges you face as an entrepreneur, finding money is probably the biggest. When you want money to start a new venture or inject into your existing business, raising capital has never been easy. But you are not alone; according to the United States Small Business Administration, over 70% of small businesses used some form of funding in 2019. Although money does not grow on trees, there are clever ways you can raise capital for your venture.
Selling stock is a great way to raise money for your business. And although selling stock to the public is typically not possible for small businesses, you can procure money by selling stock in a private placement. This way, you get to choose who becomes a shareholder in your firm. Of course, you need to have stock sales agreements and set a stock price, but a proper stock market research will help you understand the process better.
Crowdfunding has been pulling people out of financial messes since 2007. The platforms allow individuals to seek financial assistance for their businesses and personal bills from internet users worldwide. Some of the most popular crowdfunding sites include Indiegogo, GoFundMe, and Kickstarter, but there are many more options for specific purposes. Prosper and LendingClub, for instance, are excellent options for loan seekers.
This is about the oldest and most popular way of getting money to start or expand a business. However, it is worth noting that the prerequisites for bank loan qualification are relatively stringent, so many aspiring entrepreneurs may not qualify. Most banks and lending institutions require a decent credit score, experience running a business, a comprehensive business plan, and other forms of proof that your business will generate enough revenue to fund the loan repayment.
Angel investors are like the opposite of venture capitalists as they are typically wealthy individuals investing more in the businessperson than the business and its viability. They also get money out of their own pockets, unlike venture capitalists who are mostly affiliated to large institutions and other investors. In return, the angel investor gets convertible bonds or ownership equity.
Venture capitalists are businesses or companies that invest in high-potential business ventures with the hope of reaping significant returns. Venture capitalists typically target startups or businesses in up-and-coming industries. And since they expose themselves to exponential risks, they are known to conduct in-depth research about various business aspects, including the company leadership, before investing. Typical target sectors for venture capital investors include clean technology, information technology, and bio-pharmaceuticals. If you believe your business can make the cut, there isn’t a more generous form of funding out there.
These are some of the most popular ways to raise money for your business. All of the options require great consideration as you are most likely going to repay the money. Depending on the type of business you want to set up, you could go for one or a combination of funding options.
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