All You Need To Know About Raising Capital For Businesses
Capital is one of the most significant aspects which determines the success or failure of a business. However, a lot of business owners are completely oblivious about the different modes of capital raising which are available to them. They either go the traditional way of making personal investments or approach lending institutions like banks, who charge exorbitant interest rates on loans.
This is why it is extremely important for businesses to know about the wide range of financing alternatives available to them. This would enable them to choose a mode of finance that matches both, their resource requirements and the organisational objectives.
Listed below are a few of the top funding options you can explore when you go about raising capital for business:
Online Lending
In a world where most transactions are being conducted through the internet, lending activities too, have shifted online. A number of online lenders have sprung up who connect lenders and businesses across varied geographical locations.
They don’t just enjoy the benefits of speed and accessibility but the funds offered by them are quite affordable as well. This helps provide quick working capital for businesses and gives them an edge in the competitive commercial landscape.
Angel Investors and Venture Capitalists
Angel investors are those who invest surplus cash in a business in exchange for a return on their investment. They operate either individually or collectively, depending upon their risk appetite.
Similarly, venture capitalists can go a long way in raising capital for business. Instead of cash, they generally tend to invest against equity and seek credible returns in a shorter time span as compared to angel investors i.e. between 3- 5 years.
Nevertheless, both angel investors and venture capitalists have one commonality. They invest in the idea. Therefore, capital raising will become all the more simplified if your business is backed by the strength of an innovative idea.
Non-Banking Financial Companies
In the modern lending environment, non-banking financial companies (NBFC) have arrived as a breath of fresh air. They provide working capital for businesses, without the encumbrances posed by rigid norms or heavy charges. This simply means that the funds provided by them are collateral-free. More so, through NBFCs, you can also consider making some alternative investments. These may include hedge funds, commodities market, managed futures, or derivative contracts, which can easily provide cheap finance.
Short-Term Capital
Raising capital for a business does not always have to be long-term. A lot of short-term instruments of capital raising avenues are also available at your disposal. These largely consist of:
– Trade credit obtained on buying and selling of raw material.
– Selling invoices to an intermediary via factoring.
– Money raised from buyers through bill discounting.
– Getting an overdraft or a cash credit facility from a bank.
All of these activities can help provide working capital for businesses in such a way that they are never short of immediate cash availability.
The Bottomline
To put it simply, finding funds to raise capital for your business is not a tough job. All it requires is some business acumen clubbed with the skills of diligence, prudence, and precision. After all, capital is the fuel that will ensure that your organisation runs smoothly.
