Obtaining the first round of capital needed to launch or expand your business can be challenging. Without capital or cash flow, your business will struggle to gain momentum, let alone expand. However, with the right knowledge, preparation, determination and patience, you could be well on your way to raising the funds you need to launch or expand your business.
What is Capital?
Business Capital is the financial assets a business needs to produce goods or services. In other words, the money needed to launch, maintain or grow a business.
There are two main types of financial capital that are relevant to raising business funds. These are:
- Debt Capital: borrowing money and paying it back with interest, such as bank loans
- Equity Capital: when money is invested in a business in exchange for shares or equity
Preparing Your Business to Raise Business Capital
The due diligence and preparation you do before raising capital will determine your success or failure. Here are six things you need to work on before you start.
1. Prepare a solid business plan
In order to pitch for funding, whether you are applying for a formal loan or looking at crowdfunding, you need to have a detailed business plan in place, including current and future plans and financials.
2. Know how much capital you need
Review your financials carefully and identify how much capital is required. Be realistic. Your potential investors or lenders will know when your business is over-valued.
3. Identify how and who
Understanding the type of business capital you want and who your potential investors are will help you identify what groundwork you will need to do to be successful. Things such as the structure of your business, your industry, your management team and/or board of directors may all play a role in gaining business capital.
4. Make sure your business is ready
Once you’ve identified how you will be raising your business capital, you will need to ensure your business is ready. Your financial and accounting systems must be efficient with fully prepared financial reports ready. Review your management team, clearly understand your industry and any other factors you might find relevant to the type of investment you are targeting.
5. Prepare an exit plan
Investors will want to know how and when they’ll get their money back and how much return on their investment they can expect. This step can be crucial if you are targeting Angel Investors, Venture Capitalists or Private Investors.
6. Use a financial investment advisor
If this is new to you, then working with a professional who understands how to raise capital can help ensure you secure the right type of financing for your business through legitimate means.
7. Prepare your pitch
Your success will depend on having a well-presented pitch (or memorandum) that shows potential investors or banks what you are planning to do, how you are planning to do it and what the financial projections are.
Once you’ve done the preparation, you should be ready to raise the capital you require. This is where determination and patience is important. If one funding methods fails, don’t give up. Try another. There are ten popular ways to raise business capital.
PrimaryMarkets is an independent, global unlisted securities and investments platform and marketplace for sellers, buyers and intermediaries. Contact our experienced advisors to discuss your options.