5 Ways of Raising Capital for Your New Business

Creativity reigns when raising capital for your new business. There are many ways to raise capital for your new business. The key is to be resourceful and focused on the right things in the process. Every region in the US has a Small Business Administration as well as an economic development agency. The job of these groups is to provide information and resources to new business owners as to capital availability. They have many relationships and can introduce you to people with capital formation expertise. They are a great place to start networking because lenders and investors usually affiliate with these groups.

Family and friends are a great first stop when raising capital for your new business. It that option is not available; there are many angel investors across the US. Angel groups are formal groups of high net worth individuals who like to invest in entrepreneurial businesses. Some angel groups have monthly or quarterly meetings which invite entrepreneurs for presentations. Though the check size is usually small, angel investment can come together relatively quickly.

There are technology fairs across the US organized by venture capital associations. These regional associations usually put on annual or quarterly events that showcase up and coming companies. A great example of this is the Smart Start Venture Forum help in Upstate New York every year. Venture capital events are a great way to show your product and test your story in front of a large and discriminating crowd. Often, these events are structured so that each company does a formal presentation to a crowd of venture capitalists. They receive feedback on their product and marketing ideas. They events are like beauty pageants and there are best in show as well as cash prizes for the winners. Sometime the cash prizes can be meaningful such as $ 25,000 or $ 50,000. Both the experience and the feedback are very valuable for most new business seeking to raise capital.

Asset based lending is a loan against your assets such as accounts receivables. There are many accounts receivable financing companies that will factor your accounts receivable once you have sales from creditworthy customers. This provides you upfront cash though it is often a high fee percentage or interest rate.

Crowd sourcing is a new way of using the power of the internet to raise capital. This is an emerging trend. This is a good way to get going if you are at the seed stage but have a very compelling business opportunity. Typically, crowd sourcing is very difficult to pull off and the capital raises are small dollars – generally under $ 500,000. Crowd sourcing is a technology savvy way of raising capital for your new business. The downside is that you will likely have many shareholders and the approach is not necessarily ideal for larger size capital raises.

Finally, many entrepreneurs are looking to creative ways of bartering or trading with other companies to expand their resource base. Strategic channel partners can provide valuable sales resources which is functionally equivalent to them making direct cash investment in the business. Many technology development companies are willing to provide free services in exchange for an equity position or exclusive contract to provide more services.

Source by [lakajira]

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