One of the most common uphill struggles when it comes to starting your own business is that of raising capital to launch. Nowadays, many entrepreneurs are able to start their business with a very low capital investment due to the low cost to entry facilitated by online systems – making it more viable than ever for anyone to do well as an entrepreneur, but there are times when you simply do need cash in the bank to launch.
For instance, you might need to purchase stock up front or acquire premises. That said, it’s imperative that start-up founders remember the need to be frugal when setting out on their journey, and create a list of wants vs. needs.
For instance, they might want a receipt scanning API to make their life much easier or a fancy BMW in order to create a good impression – but it pays to be frugal when starting out, and in this sense, the “lean” start-up tends to be the preferred model of most entrepreneurs and investors.
Just to confirm, for the purposes of this article, the term ‘capital’ relates to the money required to launch your business and get it off the ground.
Raising such capital is rarely an easy task, and many entrepreneurs feel petrified at the prospect of approaching investors due to the fear or rejection, public speaking, and the prospect their idea could be “stolen”.
The early days are an uncertain time, yet it’s only through perseverance, persistence, and pushing yourself through the tough times that you will breakthrough to success… and you will, it’s just a matter of effort and developing your skill.
There’s a popular saying that describes how a person becomes luckier the more they do something, and this is true of pitching your business in order to raise capital – the first few times are like a cold shower; a rude awakening that whips you into shape, the next few are more about refinement and shaping things up, then the last few are a breeze — but you couldn’t get through to that place without first going through the discomfort.
That said, there’s no reason you ever need to pitch your business to investors – here are three ways you can raise capital when starting your own business without having to pitch your business to external investors.
GET A BUSINESS LOAN
The most traditional route has always been to get a small business loan from a finance company such as a bank. This remains one of the most reliable and effortless ways to finance your business as the loan is often personally guaranteed, meaning, it is secured on an asset such as a property. This way, you retain full control of your business but assume all the risk!
FRIENDS AND FAMILY
Borrowing money from friends and family, or having them come on board as informal investors, can be a very accessible route of financing your venture yet it can come at a great social cost should your venture not turn out to be a success; meaning you lose a lot of people’s money!
A recent trend is that of crowdfunding; this is where you pitch your idea via an online platform and people pledge money to back your idea, often in return for equity or more commonly in return for a substantial pre-purchase discount.