In order to get a business up and running, you will generally need to raise some capital. In fact, you will often have to raise several rounds of funding before you are considered an established company. There are many different ways to raise this early capital, and you may need to be at different stages of development to tap into different sources. Here are three ways to raise capital if you are an early-stage company.
Family and friends
For many, looking to family and friends for business capital can feel like getting a handout. Although you want to make sure you have a solid business plan you can present to them and make sure you can show a significant investment of your own capital first, there is nothing wrong with tapping family and friends for early capital. That being said, you also want to make sure you establish a firm repayment plan with them at very generous terms.
There are many products on the market today that only got there by running successful crowdfunding campaigns. Not only will crowdfunding help you raise the capital you need, but it is also a great way to do market testing to ensure there is actually a market for your product. Suppose you can generate enough interest in your product to raise early-stage funding through crowdsourcing. In that case, it will also help you later on when you go looking for larger individual investments.
Angel investors/ Personal loans
If you have good credit, you may qualify for a low-interest personal loan, which you can use to fund your business. However, there are pros and cons to both angel investors and personal loans, which you want to weigh carefully. You don’t necessarily need to already have a revenue stream in place with angel investors because you generally do not have to pay angel investors back. They get a stake in the company instead. As the company grows, so does the value of its investment. With loans, you don’t give away any of your company, but you also have to start paying them back fairly quickly, which means you need to have a revenue stream to do so.