Other Ways of Raising Capital – Stocks and Bonds
Starting a business requires planning and structure. The challenges of generating funds, getting partners and developing the business are important for the growth of a successful business. Ways to raise capital forms an important part to meet challenges which one faces in a new business or a growing venture. Even if you start a business with a brilliant idea and people who wish to work for you, your success depends on your ways to raise capital for your business. The growth of small companies to large corporations is because of their innovative ways to raise capital, hence getting enormous returns.
Ways to raise capital requires innovative ideas and great strategies. At different stages of your business, you will need to research new ways to raise capital, to meet targets. Although, lot of alternatives are there in the market, there are ways to raise capital which you may wish to consider. Some of the ways to raise capital are personal investments, investment by partners, investors, equities, loans and venture capital firms.
If you decide to open a business, you should first consider the easiest ways to raise capital. The best way to raise capital is to start raising capital on your own. Calculate the funds you have in your savings, mutual funds and other funds which you have saved for yourself. Remember, starting a business is all about taking risks and managing your finances well. After calculating your liquid assets, the easiest way of borrowing money is from your family and friends. Tell them about your business ideas; they may be able to help you considerably. If your friends and family see the growth of your business, they will think about investing with you.
One option on ways to raise capital can be joint ventures. Make people join your business by explaining them the benefits of joining your venture. Joint ventures are a good way to raise capital and increasing resources. This way you will not be borrowing money to raise capital, but pooling in money for investment.
Ways to raise capital also includes loans from credit cards. You can use cash on your credit card to manage initial expenses as a way to raise capital. The interest rates on cash on credit cards are high but credit cards are an option for you if you do not wish to borrow from people. If you pay your credit card on time, you should have a good credit limit.
At the initial stage of your business, you need a lot of funding. At this stage you need to find ways to raise capital. After calculating your funds and investments, you can look for investments outside. The best way to raise capital is, to ask for an investment from a venture capital firm. This is a very lucrative offer, however; you will be paying a considerable amount of percentage against such a loan. A venture capital can get you lot of resources, financial help, recruiting and management plans you are considering. Angel Investors is also a good way to raise capital. Investors or Angel Investors are wealthy investors who wish to give money at interest. These investors are very important for initial funding of a business project.
An important way to raise capital is a Small Business loans. Such loans are given by the government of various countries to encourage people who wish to start their own business. These small business loans are provided at very good interest rates for upcoming business entrepreneurs. This way to raise capital gets you a loan at affordable interest rates.
If you have a good bank 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. For a bank loan you need to have a good finance record. If the banks find your business proposal good, you will be able to get a loan from the bank. Another way to raise capital is to apply for a personal loan. A personal loan has a lower interest rate than a bank loan.
All businesses require an initial investment to meet their requirements. Ways to raise capital by innovative ideas have led to the growth of large corporations and businesses. Some of the ways to raise capital by large corporations are:
Issuing Preferred stocks: As a way to raise capital, companies sometimes issue preferred stocks to buyers. These buyers hold a special privilege in shares of the company by getting paid dividends even if the company lands into financial problems.
Bonds: A way to raise capital is issuing bonds. The corporation pays the bond holders a specific amount of money at a specific date. These investors receive interest from the corporation. Bonds are preferred by large corporations as the interest they need to give such investors is less than any other way to raise capital. Corporations need to pay interest to bond holders even if they are at a loss.
Stocks: Large corporations also sell stocks as a way to raise capital. The shares in the stocks are set at a fixed price. Investors invest in stocks which pay large dividends. Share prices in stocks of a corporation also rise if the company does well in the market. The share holders earn by selling and buying shares in the market.
You can find the best ways to raise capital by knowing your potential customers and the market. You need a way to raise capital to invest in your business in the beginning, so that you can gain maximum benefits through your investments. If your business is already doing well, you have to find a way to raise capital during different stages for different purposes. Some of the investments will come out of the profits earned; however, you will need to raise capital for other investments. If your corporation has grown to a level where you can issue stocks and bonds, make your company public. Your business depends on an innovative idea, market research, knowing your customers in the market and raising capital for investments.