Need Funding? Four Ways to Raise Capital for Your Business

Let’s be honest – if everyone had all the money they needed to start their own business, nearly everyone would do it.  Most likely, however, you’re a solo innovator or motivated team eager to bring your ideas to the world, and now you need the startup funds to make it happen. Even if you’re already an established business and you’re looking to expand to a new market or introduce a new product line, you may find yourself in a fundraising situation without a clear direction of where to go next. Here are a few sources to get you moving on your way.

  1. Banks and Financial Institutions – If you have good credit and you or your business has sufficient assets to put up as collateral, a traditional business loan may be the best way to receive the funds you need with the fewest strings attached. The bank provides the money, and you pay it back (with interest) within an agreed-upon timeframe. You retain all control and ownership over your business and operational decision making, and the bank does not receive any portion of stocks or assets.
  2. Angel Investors and Venture Capitalists – These are the tried-and-true gatekeepers of business funds. They’re the connected investors, bankers, and fund managers looking for the next great opportunity. Because of this, they’re highly sought after and competition for their attention is fierce. You’ve got to have your business plan and all documentation in order and have a knack for presentation if you want to win them over. Once you do, be aware that you’ll likely be asked to let go of some percentage of the ownership of the company and some business decision-making power in order for the investor(s) to feel like their funds are protected. If you’re not comfortable with that idea, you should pursue other options from the beginning.
  3. Crowdfunding– In the past few years a tremendous shift has occurred in capital fundraising. If you’re familiar with the website then you’ve already seen crowdfunding at work. Opening up your business or product to small monetary contributions can be a surprisingly effective way to reach your financial goal. Under the traditional “kickstarter” (donation) methods of crowdfunding, you must offer something in return for each donation/contribution, but these can range from t-shirts and stickers, to preferential status on the delivery of first-production-run items, to limited-edition products or signed originals. If you can be creative with your compensation models, you can end up in a very advantageous position. Of course, there are other methods of crowdfunding that involve the issuance of equity or debt; however, this is a tricky and highly regulated area fraught with peril. So, be sure to consult with an experienced securities attorney before entering this arena.
  4. The Buck Stops with You – Finally, look to yourself or (if appropriate for your growth and financing strategy and if it is done in compliance with law) your friends and family. Filmmaker Kevin Smith often shares his experience with funding his first-ever independent film completely on personal credit cards and loans from his parents. And while it’s not the most traditional method of funding a business, if you’re confident in your plans then it’s simply a means to an end. Be careful however, as securities laws still apply and even the most trusted friend can become your greatest enemy if enough (relatively speaking) money is on the line.

If you’re still lost with what to do next in your business start up – a qualified attorney can help guide you in the right direction. Contact Doida Law Group to let us advise you with appropriate next steps.

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