Funding Startups: 5 Ways to Raise Capital for Your Business

When you’re just getting your business started, there are times when you will need to get some extra capital. In the past, this typically meant approaching a bank with a proposal and hoping for the best. Today, however, there are more ways to raise capital than ever before. The following five options should always be considered, with the pros and cons of each weighed to ensure you’re following the right funding path for your business.

Crowdfunding

Crowdfunding is becoming extremely popular for everything from funding medical treatment to getting money for startup businesses. With dozens of crowdfunding platforms out there, it will take some research to find the right one for your business, but it is often worth the effort. Crowdfunding allows dozens, hundreds, or even thousands of people to combine their money to invest in your company. This reduces their risk, and allows you to get the funding that is needed.

Angel Investors

An angel investor is an individual who is willing to provide you with the capital needed to start or grow your business in exchange for something of value from the business in the future. This is often structured as convertible debt, or some type of ownership equity. It is not structured as a normal purchase of ownership into the company though, which can be beneficial for both you and the “angel.”

Look to Yourself

If you have money saved, you can provide it to the company to help it grow successfully. This is likely the most popular way new small businesses are funded. While you will be putting your own money at risk, the potential reward is often far higher. Having your own money on the line can also provide you with the motivation needed to get through potentially difficult times in the coming months and years.

Selling a Portion of the Business

If your business has a lot of potential, you may be able to find someone who is willing to buy a portion of the company. You can sell any percentage of the company you want, though most business owners will want to keep it at or below 49.9% so they retain control over the business. This can be a costly option in the long term, but may be worth it if there aren’t better ways to get the needed capital.

Traditional Lenders

While there are many great new ways to get funding today, it would be a mistake to overlook banks, credit unions, and other traditional lenders. In addition to being able to get you the money you need, being able to get a loan from a bank can help to give your new business more credibility moving forward, which can actually be quite valuable.

Make Sure You Handle It Properly

Regardless of how you choose to seek the capital you need for your startup, make sure everything is handled properly when it comes to how it is legally structured. Contact APH Law to have any financing contracts written up, and negotiated to ensure you are protected.

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Written by APH Law PLLC

APH Law PLLC

When we founded APH Law PLLC in 2010, we did so out of a desire to connect business owners with more and better opportunities. No matter what industry you’re operating in, creating a strong foundation, preparing for the future, and protecting against challenges are key to long-term success. It is this kind of support that we take tremendous pride in helping businesses.