5 Strategies For Raising Capital As A Small Business Owner

Capital is a requisite for running and scaling a business. From investing in the set-up and logistics to entering new markets and diversifying the product line, everything requires adequate funds. This is the reason why the business plan has a whole section dedicated to financial planning. It provides details of the cash available, the amount that will be spent on each process, and the expected returns. The entire organisation functions on its financial prowess. Without financial stability, it is impossible to stay afloat. It entails accumulating sufficient funds to be invested back into the business and used to pay its bills, salaries and debts.

In addition, the venture must also save an amount every month to increase its emergency fund, which can be leveraged during an unforeseen situation. This needs a constant flow of capital into the business, either generated or secured from outside. Some big investments need financing and the support of a third party to expand and thrive. Here are five strategies small business owners can employ to raise capital for their venture. These are also helpful in keeping it safe during periods of uncertainty.

1. Self-Financing or Bootstrapping

Many start-up founders use this strategy, but it can be leveraged by entrepreneurs who purchase business for sale in Brisbane. If they have surplus cash that can be invested in the entity, they should go ahead with the plan. However, they should have a separate business bank account. It will help to keep personal and business funds separate for clarity of financial records and tax planning. It ensures you are not giving away equity to others and will retain full control over the organisation. However, in the self-financing strategy, the funding is limited, and the owner may lose personal assets in the process.

You can ask your immediate family or friends to invest if you do not have a significant amount. It is easy to borrow from loved ones because you get the amount you need without unfavourable terms or high-interest rates. However, you must prepare the paperwork and decide the payback terms to avoid disputes later. An advantage of this strategy is that you do not have to provide all the paperwork to take out the loan. The downside is that if the growth plan does not work out, you lose the money and strain your relationship.

2. Take Out A Business Loan

Scaling the business needs leasing a bigger office, hiring more employees, buying more stock and spending more on marketing and distribution. All these activities require significant capital, which can be secured through a business loan from banks. You will need the expertise of your accountant to determine the amount that needs to be borrowed. They will also check if the business can afford to repay the loan according to the projections.

The accountant will also assist in choosing between secured and unsecured loans. Unsecured loans offer a low-interest rate and no guarantee, whereas secured loans have high-interest rates and need an asset as collateral. It is vital to assess the terms of repayment and interest rate before applying for a loan. Whether you are expanding or looking for a business opportunity in Brisbane, you will have to provide a solid business plan and accurate financial reports to the bank for approval. So, keep all the paperwork ready to avoid hassles.

3. Seek Government Grants

Entrepreneurs can receive grants from the federal government to finance their growth plans. In addition, there are state government grants and support programs for innovation, commercialisation, research, sustainability, etc. These can also be utilised to get rebates, incentives, free business tools, workshops, networking opportunities, etc.

Government will assess the business, its financial standing, length of establishment, location, industry, competence, and the need for the grant. Securing a grant is highly beneficial because it does not have to be repaid, but it may be challenging to get it. Also, the process is quite long, which can delay the growth plan and affect the business adversely.

4. Crowdfunding

With everything going digital, raising capital is also taking the online route. Entrepreneurs can now secure funds for their businesses by asking a large number of individuals to invest. The process takes place online and is known as crowdfunding. It has become highly popular in the past few years and offers the flexibility to opt for equity-based or reward-based funding. It also helps to inform the public about the venture and its products and increase brand awareness.

However, the process requires a lot of marketing among the pool of investors on the platform to generate the funding for quick growth. Entrepreneurs also have to pay a fee for utilising the crowdfunding platform, and there is no surety that the required capital can be raised. Still, many who own a start-up or have acquired businesses for sale in Brisbane use it to grow their small venture.

5. Find Angel Investor and Venture Capitalists

Although angel investors are more inclined to fund high-potential start-ups, they provide financial assistance to small businesses. If the entity is operating in the field of the angel and needs mentorship and guidance, angels can help with capital and support. They do this in exchange for ownership equity and become a part of the decision-making process.

Growth becomes streamlined when venture capitalists invest in the business and help to scale up. They provide financing to businesses that showcase the ability to grow profitably and have a bright future. These investors are interested in entities with capable and experienced management and with a robust business model. Thus, if you have purchased a business for sale in Brisbane, you can look for venture capitalists to expand quickly. The downside of this funding is that you will not have complete control over the venture.

Wrapping Up

Raising capital for a small business is easy when the entrepreneur has clear goals and a business plan that can convince investors. They must use professional help to find the ideal moneylender with favourable terms for debt repayment. Building a rapport with the investors and shareholders is also essential to maintain a smooth relationship.