The business realm with its infinite areas of focus always echoes one recurrent question – how does one effectively raise capital? Many people say that they have cutting edge business ideas but capital keeps stalling their progress. In a difficult operating environment, capital can be quite elusive. However, my observation has been that people tend to be stuck in traditional means of raising capital. Usually when people think of business capital they think of financiers such as banks, micro-financiers and so on. Considering the ailing economy and the high likelihood of you not having collateral your loan requests won’t cut it. Today I’m sharing ideas on other means that people hardly ever think of.
Here I’m referring to your own funds – funds you can attain through various endeavours such as job(s). You can save up over a period of time knowing you’ll start your business at a later time – don’t feel rushed. Don Wong Chang, a billionaire clothing business owner started his business using USD11 000 that he saved over a period of 3 years from several jobs he worked on. If you can only be resolute, hardworking and patient you can raise enough capital on your own. This will entail no debt and all sorts of formalities characteristic of loan processes. For more on saving I recommend the book, The Richest Man in Babylon by George S Clason.
Friends And Family
There are 2 options that I want you to have in mind namely, gifts and equity. Gifts are pretty clear; it’s simply a matter of pitching an idea to a friend or loved one and asking for a financial gift to help you take off. However, a formal agreement (on paper) would be strategic to avoid any future complications. For instance, you might have misunderstandings in the future and they might start claiming the money as if it was a loan. If they aren’t comfortable being a co-signatory to an on-paper agreement then it’s better for you to not get anything from them. The equity option involves getting money for shares in your company or money that you’ll only start to pay back after you start realizing substantial profits. Involving a lawyer can be expedient so as to get assistance on drafting the agreement.
There are several types of entrepreneurial competitions that get to be held where winners get capital as prizes. Always be on the look-out in the press as such opportunities may arise. Lots of people have started businesses through funds they won in such competitions.
Get involved with local business hubs as they can link you up to angel investors. Business hubs can be in the form of incubators or accelerators and they offer a wide network of business stakeholders. Business hubs usually have ecosystems and hold events that expose you to many potential sources of business capital.
If you’re enterprising enough, this strategy can be applied to any business type. The concept is to get people to pay for your products or services before they are on sale. Essentially this means you can get money from customers to actually finance the production of the goods or services you want to offer. Let’s suppose you have a design concept for corporate wear for a certain company (you’re a fashion designer). You could make one sample and pitch the idea to the company. If they buy the idea, you can then get them to make a deposit and pay the balance when you’re done. That would mean you get money to fulfil the order from the actual clients.
Assets And Liability Disposal
I’m amazed at how some people never think of this means of raising capital. There are high chances you own things that you rarely use or that you can get rid of without any disruptions. They can be assets or liabilities; whichever way you can sell them and raise significant amounts of money. Most people have money locked up in items they own and yet being so oblivious of it.
This is not yet a big thing in our continent but in other countries it’s working. There are online sites such as Kickstarter, GoFundme or Indiegogo where you can pitch business proposals and any interested person can contribute whatever amount if they buy your idea. The idea is to get varying amounts from numerous people thus making the process of raising funds shared out across many people. You can always visit such sites and give it a shot.
So these are the 7 means of raising capital that entail thinking outside the box. Break free of limiting beliefs and explore ways that seem unconventional; the breakthroughs might amaze you.
Remember money is attracted to great ideas; you just have to have a paradigm shift in your mindset.
Adapted from an article by Kudzai Munyukwa