How to raise finance for your start-up

Founding a start-up business can be an incredibly tricky task. You will often find yourself convinced by the product or service you wish to promote and boasting the right personnel to turn your dream into a reality, but it's difficult to start without the necessary capital to get things off the ground.

At these difficult times, you need to think long and hard about exactly how you can raise the funds needed to begin with a start-up venture. While there is no guaranteed path to success, the good news is that there are plenty of possibilities you might want to consider.

1. The bank

Of course, the most obvious starting point is the bank where you will ask for a loan to cover your initial expenses. If you are confident that you can order goods with payment at a later date and secure credit from various companies, you might not need a huge sum, but most people will need to cover their outgoings for a significant period of time.

2. Get a partner

In some ways, seeking finance for a start-up is a little like dating. You need to flatter potential partners and talk up your own credentials. If you do this, you might just find that somebody takes a liking to you and what you have to offer and backs your project.

3. Borrow from friends and family

Perhaps a more likely route to finance is through people you already know. Borrowing smaller amounts from a series of friends and family members can be an effective way to raise the amount you require to get your new business moving. So spend some time considering exactly who you know who might be able to help you.

Remember you are asking people for money, so you will need some evidence and projections to back up your venture. You cannot sell it on opinions and hope, so unless your record already shows immense success, you will need to delve a little deeper to prove your case.

It is also worth considering the personal impact on the people you are borrowing from. If you know that your grandmother is investing her life savings in your business, you should take a step back and suggest that she should only hand over what she can afford to lose. A little morality at this stage can make you easier to back again in the future.

Another issue to consider is that of personal guarantees. This is where a lender - such as a bank - will ask you to guarantee a loan with one of your private assets, like your home. It is rarely worth doing this as you only stand to lose out heavily if things go wrong, so seek finance without this string attached.

There is plenty to consider but if you do so effectively you might just put your start-up in with the best possible chance of taking off and enjoying a long period of success. If you get it right, you can set yourself up for life with your own business that delivers results and never relies on anybody else's cash again.

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Published on: November 30, 2012

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