As a budding entrepreneur, it’s important to remember that starting a business comes with challenges. Among the many you’ll encounter, the most challenging ones are those that arise at the starting phase. Depending on the kind of business you’re about to start, a substantial amount for capital is necessary. And, if you don’t have enough savings to cover the capital for your business, then you’re going to have to look around for other alternative sources.
While raising money for capital investment may seem challenging, you can think of it as a worthwhile pursuit. If you work hard enough to turn your business into a profit-earning asset, eventually in the future, you’ll have more than enough to raise a return on your investment. But you need to start by looking for these capital funding sources.
With that said, here are three alternative ways to raise capital for your business:
- Bridging Loan
A bridging loan is one of the best short-term loans for entrepreneurs who intend to raise enough capital for their business. As its name suggests, it’s a financial bridge to cover any expenses at the time of business application and property acquisition. This is especially helpful if the mortgage and other long-term loan applications haven’t been approved yet.
Here are reasons why you should consider applying for a bridging loan:
- It can help you fund a new property purchase. Some entrepreneurs prefer to buy their own business property first so they won’t have to rent. This is especially the case for those who are starting a big business. A bridging loan is one of the options you can use for funding the purchase of a new property.
- It’s great for funding renovations. If your new property requires renovation, a bridging loan is great for this purpose. Bridging loans can be arranged quickly, so it can fill up the short-term funding gap before a traditional mortgage can be secured for the business.
- It can help you survive the delays of mortgage applications. Even if you may have your documents ready, there are still instances when you may experience delays in your mortgage applications. The amount you can get from the bridging loan can cover the dead air or period between the purchase of the property and the mortgage approval.
Like any other type of loan, however, bridging loans are also influenced by factors like interest, cost of acquisition, and inflation.
As its name suggests, with crowdfunding, people will fund the money you need for your startup capital, rather than a bank or one to two investors. Once you receive the funds you need to fuel your business venture, you can launch your project immediately. Most of these crowdfunding campaigns happen over the Internet, as there are now many apps and websites solely for crowdfunding.
Generally, funds earned from crowdfunding can come in the forms of donations, equity, debt and rewards.
The biggest challenge with crowdfunding, however, is convincing potential backers and sponsors that your business is worth funding. While success may not always be guaranteed, it’s still worth a try, even if it means getting a smaller amount than expected.
Bootstrapping work for entrepreneurs who already have an existing business or money saved up, with capital to use for a new business they intend to start. Essentially, this involves stretching resources and finances, to be able to maximize purchasing power. Many investors recommend bootstrapping to be the first choice of capitalization funding for many businesses, as it’s also the safest. You’re not indebted to any institution, and you have full control over your finances.
But, if your current finances are already stretched out, bootstrapping can also be a lot more challenging. Here are some tips to smoothen out the bootstrapping process for you:
- Research your market and competition, just so you can ensure that you have a target market for your business, and that all your financial efforts won’t simply end down the drain.
- Create buzz early on, so you can speed up your return-on-investment period. Even when you haven’t launched your products yet, create teasers and other marketing ads just to create some noise about your product’s arrival.
In an ideal world, an entrepreneur like yourself will have enough finances and capital for the materialization of their business pursuits. But this isn’t always the case. Unless you’re extremely financially stable or you’ve been left with a grand inheritance, you’ll be in the same situation as other starting entrepreneurs who need to find other options to finance their business’ needed capital. The choices above are some of the best alternative options. With each having its respective pros and cons, the final decision is up to you as you’ll need to consider your needs and preferences.