How to Raise Money for a Business?

The capital is one of the first things that needs to be taken into consideration when one is setting out on a business venture, and there are many different sources to obtain this capital. It is not necessary to stick to one particular source rigidly; even a combination of various different sources can be used.

Anyone who is wondering how to raise money for a restaurant, a start-up, an advertising agency, or any other small-scale venture should keep these methods in mind. Approaching the right people for it is vitally important for the success of the business, and if this is not catered to properly, it will be doomed from the very beginning.

Personal Savings

This is the most obvious source of money for starting a business. If you have saved up enough money over the years, go ahead and make use of it to serve the underlying purpose. You will not be answerable to anyone, and you will not have to worry about repaying someone. If you choose this option, ensure that you are not using all your savings though. Many people neglect this option because if they lose it, they will have nothing left to live on.

Venture Capitalists

This is the next most obvious source for your initiative. Venture capitalists are professional agencies who put in venture capital into an upcoming business. What they get in return is either its share, or a share of the profits, or pretty high interest rates. It may sound like exploitation, but this is one of the best ways to get money. Venture capitalists are always looking for new and innovative business ideas that are likely to succeed.

Angel Investors

These are a refined form of venture capitalists, but many people think that they mean the same thing. Angel investors are less demanding than venture capitalists and remain with your initiative in the long run. Usually, these are someone who you would know personally, and they are simply looking for ways to get a higher return on their investment. How companies raise money depends a lot on the nature of the business and the method of entrepreneurship adopted. Angel investors also help them by providing some guidance and mentoring.

Personal Borrowings

Here is a method that should be avoided as far as possible. You can borrow money from someone you know, namely your friends, family, or other people. The problem here is that once you mix business and personal relationships, things start to get a bit sour. This is a situation that needs to be handled with great tact and diplomacy, and not everyone can manage to do that. Still, this is a method that many people consider.

Bank Loans

Another answer is to approach a bank for a small loan. With banks, you will not be required to pay a very high interest rate, but you will need sufficient documentation about the business model of your initiative. Along with that, your credit history and financial stability will also be scrutinized, in order to find if you are worthy of getting a loan. Most people would love to get it, but are simply not eligible. This is especially true for someone looking to collect the money, without owning any fixed assets.

Advertising

Here is another answer, but one that requires a suitable amount of investment and more than a fair share of patience. If you can handle the advertising of your upcoming company well, you can get more than enough money to sustain it in the long run. There are some websites that also allow you to advertise your business plan and then suit you up with a matching investor. This is a slightly unreliable method for sure, but it works wonders if one can find the right match.

Other Options

One can approach some small-business investment companies, business development commissions, life insurance companies, or a money broker. The reliability of these options will not be very high, and their demand may be exorbitant, but if you have run out of all other options, then this is something that you will need to resort to.

You should act as early as possible, in order to get sufficient capital and business financing. There is a variety of sources available, and as long as you have a great and reliable plan, you will be able to procure capital. It is not all that difficult; all you need more than anything else is faith in yourself.

How to Establish Business Credit?

With the rapid change in the financial world, everything related to finance is changing, whether it is credit facilities or investments. Steps are being taken to make everything simple, convenient, and fast. There is a consensus among financiers that businesses have different financial requirements, and there is a need to resolve them. One such step taken by these, which may help businesses, small or big, is to establish business credit. This is an option which you can avail of, where financial institutions provide loans, without needing the credit rating or the personal assets of the owner as security. And, most importantly, the organizations of every size and age can avail of it, whether it’s old or new, big or small. Whether you need finance for setting up or expanding the business, purchasing material or equipment, or advertising, this facility is always there for you.

Steps

There are various steps involved in establishing it. The first point that you should remember is to ensure strong fundamentals of your business. Moreover, you should also take care to see to it that you meet the requirements of financiers. Ensuring this would make listing of your business with commercial credit reporting agencies easier.

The next step is to develop a connection with suppliers and vendors. These suppliers and vendors should be such that they not just extend credit payments, but most importantly, report the history of your payments to the respective agencies. You need to have the backing of at least five such vendors, and they should not tie your personal guarantee or social security number while giving you such credit.

Obtaining credit cards for the same is the next step. You should get three such cards, but make sure that they are not connected to your personal credit. Moreover, you should also ensure that these credit card companies report your transactions and payment history to the concerned agencies. However, unluckily, there are not many types of such cards, which would consider approval without checking your personal credit report. In such a scenario, you should look around and search for such a card. Take your time in this step as it can be crucial. In case you are not able to pay your corporate bills on time, your personal credit would nosedive, even if you have an excellent history. Similarly, if your commercial credit history is excellent, but your personal one is not that good, it would affect your business ratings. So, it’s absolutely important to segregate both these entities. Once these steps are done, you can then opt to use these references so as to obtain bigger credits.

How to Establish It for the First Time?

Today, suppliers and creditors are increasingly checking, not only your personal, but also your commercial credit reports to decide on how much to lend and at what rate. This is the reason why it has become necessary to set up a separate report. In case you have set up your business for the first time and still haven’t established it, you can opt to get trade lines so that you can start building your respective report. You may incorporate or apply for a Limited Liability Company so that your business seems to be a separate entity. You can also get an Employer Identification Number from the Federal Government. Open up a bank account for it. Moreover, a dedicated phone line would do you a whole lot of good, but make sure that you list it. Once these steps are done, you can ask for business credit in the name of your company and start building a good score.

How to Establish It With Bad Personal Credit?

Even if you have a bad credit history, it is still possible to establish it. For this, you should legally separate from your business. If you don’t opt for this and you apply for one, your social security number would be used, and your bad personal credit would come in the way of getting you a good deal. For separating your personal finances from it, you need all the necessary licenses, and most importantly, apply for a tax ID number.

You need to start small as getting a business loan is easier for a startup without credit history, in case you have dropped your personal credit. Build it over time, paying off the amount you have borrowed on time and making the required payments on time.

You should not only concentrate on building the credit score of your business but also work on rebuilding your personal one, as well. Ultimately, you may need to approach a larger financier for a bigger loan, and in such cases, financial institutions consider both these scores.

Thus, the most important thing to remember, alike in all other cases, is that you should try to make your payments on time so that you can establish it fast. These are the necessary steps that will help you to build up a good credit score.