Raise Capital – An Introduction
Funds are always welcome if you are planning to start a business or have already started one. Financial planning is the key aspect of a successful business. Raising capital for the business is an important part of the financial planning structure. Once you’ve started a business you need to calculate the amount of expenditure you will incur and the amount of capital you have to raise to cover that expenditure. All businesses require an initial investment to meet their requirements. Innovative ideas to raise capital have led to the growth of large corporations.
First you have to find out the sources to raise capital. These sources can be in the form of loans, leasing, investors and public offering. If you decide to open a business, you should first think about ways to raise capital. First you should start to raise capital on your own. Make a list of all the savings that you have. Calculate the amount of money you have saved in your accounts and funds. If you manage your own finances well, you will know how much capital to raise.
Once you have calculated your own finances, you need to raise finances through other means. The most innovative method to raise capital is to make a project for your business. You can then raise capital by borrowing money from your family and friends. It is easier to borrow money from family as they will be interested in your project.
Show your friends and family a presentation of your project and invite them to help you raise capital for your project. If your friends and family see your investment and the growth of your business, they will be happy to raise capital for you. You can also raise capital by forming joint partnership firms. You can make people join your business by telling them of the profits earned and the benefits gained. In joint partnerships, partners pool in money and resources to raise capital for businesses.
If you have a good credit history and have been paying your credit cards on time, your credit limit will be good enough to raise capital for your business. It can support some of the payments of your business and you can use it to manage initial expenses. The interest rates on credit cards are high but work as a good option to raise capital, if you do not wish to borrow.
At the initial stage of your business, your business needs lot of funding. It is important to raise capital for the initial stage of the business. On our Sister website, raisecapital.co.uk, on finding an investor in the UK. Where you have an excellent credit rating you may wish to seek to raise capital by from a high street Bank. However, you should know that banks offer rates at varied interests from anywhere between 12-22 percent and if there commercial rates are lower, please be assured that you will most likely need to be your own guarantor. First you should make a list of your fund and investments. Once you have calculated the capital that you still need to invest, you can ask for investments from investing firms or a venture capital firm. Such firms can give you lucrative offers to raise capital. Keep in mind that you will be paying a considerable amount of interest when you raise capital through a venture capital firm. You can also raise capital through angel investors. These are wealthy investors who give money on interest. These investors are important for the initial funding of a business.
Various governments also give out loans to new businesses. These loans are called small business loans. These loans are given out to encourage new businessmen to start their own business and to assist them to raise capital. These loans are given at affordable interest rates. A good bank record will also help you to get a bank loan. You can raise capital by applying for a loan from the bank.
If you have a good finance record, you can apply for a bank loan as a way to raise capital. Banks can provide you a considerable good amount to finance your business. To get a bank loan you need to present your business presentation to the bank. If the bank finds your proposal good, it gives you a loan. Otherwise, you can always apply for a personal loan from the bank.
Large corporations raise capital through bonds, issuing stocks and preferred stocks. To raise capital large corporations sometimes issue preferred stocks to buyers and employees. These buyers get a special privilege in shares of the company. Such buyers are paid dividends even if the company is in financial trouble. To raise capital corporations also issue bonds. In bonds the buyers get specific amount of money at a specific date and also receive interest from corporations. This is the best way to raise capital in a corporation as the interest rate is lower than any other type of loan. However, in bonds corporations need to pay interest to bond holders even if they are at a loss. A brilliant way used by large corporations to raise money is by selling stocks. Investors invest in stock as they get paid large dividends. Stocks are sold to raise capital in the company. If the company does well in the market, the share value of these stocks rise, leading to more investors.
If you wish to raise capital, you need to research the market. Find who your potential customers are. You need to find the best way to raise capital for your business, so that you can benefit through your investments in your business. Even if you have a well established business, you still need to raise money for upcoming projects. Though some of the investment cost will come out of the profits, you need capital for the other investments.
An innovative idea and market research has led to small companies becoming big corporations. You should know your customers well. Customer demands keep on changing and you need more innovative ideas in your business to give the customers best deals. For your business, you have to raise capital during different stages. Loans are available to raise capital and if you have a big corporation you can issue stocks and bonds and make your company public.