The first step is the hardest. When an entrepreneur decides to set up his shop, the first and the most basic step is to raise the financial capital.
What is financial capital?
In the simplest of terms, financial capital is the initial amount of money that the business so set up will have at its disposal to spend on the various processes that it intends to run within it. It is the first flush of cash into the company and is instrumental in determining what is on the priority of the company.
Nay, raising capital for a startup isn’t so easy:
It is obvious that raising the first capital for a company which has either no shape or form yet is the most daunting and difficult part. It involves a lot of convincing and coaxing skills that will help the entrepreneur appreciate the fact that it is not so easy after all to convince the others that your idea is so brilliant!
However, daunting and how much ever determination it takes, it is a step well worth it.
Before you begin to determine what is the right way to raise capital for your business you must create a business plan to show to your prospective investors.
What exactly is a business plan?
It is a blueprint of the business that you propose to set up. it is documented that talks briefly about
- The nature of the business that you propose to begin
- The objective of setting it up
- The mission statement if there is any of your business
- Your short term and long term business goals
- The costs and expenses that you intend to bear
- The number of staff that you intend to hire, etc.
Here is a list of ways that you can raise the capital finance of your business
- Friends, family, and acquaintances:
You can borrow money from your immediate circle and try to give them an added advantage by giving them interest on their investment or some other option.
- Angel investors
Any rich entrepreneur who is interested in helping a potential good startup.
- Private investors
These are investors who are looking out to fund promising business ideas if you can convince them that you are going to make it with a little help from their pockets.
- Loans from financial institutions like banks
Banks and other financial money lenders can lend you money but you have to pay back to them in time and with interest rates that they dictate.
Taking cash form future customers upfront is also a good idea to start. This is risky but cannot be ruled out as an option.
- Investor bankers:
Experts believe that these should be on the last call. They are people who will buy shares from your company and sell to individual customers to raise capital on your behalf. This means that you can start expecting to hold only a fragmented piece of ownership when you adopt this means of raising capital.