by Naz Daud • 2020-01-24
Raising capital for a business startup is one of the most difficult business tasks you'll experience and it requires every ounce of entrepreneurialism and skill to convince others to part with their money.
Entrepreneurialism aside, raising finance requires a sound business understanding and an ability to think laterally as to the available sources of finance open. Remember that business startup requires finance to get things off the ground but also to keep you personally above water, thus the costs necessary to start off can be quite significant.
However by drawing on your entrepreneurialism and the strength of your business model, it is nevertheless possible to raise the funding you need without having to go to any extreme lengths.Entrepreneurialism is all about taking calculated risks, and this is never more obvious than during the startup period. But entrepreneurialism alone doesn't make a business, without finance, the most inspirational business plan won't get off the paper.
When most people think of funding their business they think initially of booking an appointment with the local bank manager to go in and discuss possible options. But there are ways of raising finance before this stage that will also help make you look like a more credible investment opportunity, and when combined with that spirit of entrepreneurialism you're capable of displaying you can get together the money you need to take things to the next level.
The first stage of raising capital is to exhaust your personal resources. This might sound drastic, but when you consider that you're also costing in your personal salary into your startup capital, it isn't. Entrepreneurialism without finance is worthless, but by using the resources open to you, you can really make a difference. That means savings, personal credit cards and personal loans where possible to contribute towards your grand total.
A prospective business owner that has already exhausted all possible means of raising money will seem more committed and will be in a better position to ask for further funding from the bank.
Asking family and friends is often touted as being a possible way of raising startup capital, but it's probably not wise to go down this road. Family members are all too quick to draw on the negative sides of doing business, and will be overly cautious when it comes to lending you money.
That doesn't matter if you make a success of things, but most small business ventures fail, and all the entrepreneurialism in the world won't rebuild damaged family relationships. If you can raise the money elsewhere, do so. Don't bring in family members where it isn't necessary to do so, and explore all other avenues of raising business capital before heading down this road.
Raising business finance is often seen as a difficult task, but with careful financial management this needn't be the case. By all means approach your local bank for help, but don't treat this as the first source of raising money for your venture where you have access to personal funds and savings.