How to Raise Money For Your Business if You Fall Short on Capital

How to Raise Money For Your Business if You Fall Short on Capital

Starting your own company can be an exhilarating and scary process all at once. One of the most important tasks is to raise the required capital to keep your business up and running. Regardless of whether you boot-strapped, took a personal loan for self-employed or raised money through an investor, you may find yourself a little cash-strapped at times. Here are some ideas that you can consider to raise funds if your working capital isn’t enough.

5 Smart Things to Do to Raise Extra Funds for Your Business

  • Approach Angel Investors 

Angel investors are individuals with a large amount of capital and invest in small businesses. They are willing to take a risk on a business idea that sounds profitable to them as they anticipate a high return on investment. At times, angel investors band together and go through business proposals to choose the perfect start up to invest in.

Apart from investing the money, most angel investors also offer to mentor using their vast experience. Another benefit of approaching an angel investor is that they know a lot of key players in the industry and may connect you with them.

  • Opt for Business Loans or Personal Line of Credit

If you feel that your capital is a little short compared to your goals, you can opt for a short-term business loan. A personal loan for businessmen can help in financing small cash flow needs. The loan amount and terms will depend on the business’s credit profile, the health of the business and the industry you are in.

You can also consider taking a business line of credit. It may be a little difficult for small and new businesses to qualify for a line of credit. However, if the business has good collateral and is well-capitalised by equity, you can qualify for one.

  • Take Credit from Customers

Another way you can raise some funds is by taking credit from your customers. You can ask for a retainer or deposit upfront for the goods and services you offer. You can then use that money for business expenses.

If you think the customers may not pledge the entire amount, ask for a partial payment. Charge the remaining amount after you deliver the product. Even if the customer defaults on the rest of the bill, partial payment ensures that you get paid some fraction of it.

  • Minimize Expenses

Do not hire a specialist for every job role. Sit down and make a costs and expenses plan so that you get a clear idea of where exactly the money will be spent. Use automated tools to increase efficiency at work and reduce as many unplanned costs as possible. When you hire, make sure the candidate can fulfil at least two areas of specialties.

  • Generate Passive Income

Hustle and come up with a stream of capital through passive income. This is one of the most popular unconventional ideas that entrepreneurs rely on to raise capital. You may have to invest a significant amount of time and little money to generate passive income but it is worth it. Once it gets momentum, you can generate a sizeable passive income that you can invest in your business.

Few passive income ideas include:

  • Starting a blog
  • Writing and publishing an e-book
  • Creating an online course
  • Becoming an affiliate marketer
  • Selling digital products
  • Making YouTube video tutorials
  • Mobile advertising

There is no need to push the panic button if you feel your capital is not enough. There are numerous ways to raise money for the business. Choose those that work the best for you.

Author bio

Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].

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