Raising Capital for a Business

One of the biggest challenges that would be entrepreneurs face is the raising of the initial startup capital. The two general categories of financing a business are debt and equity. Debt requires repayment of a loan. Equity involves raising capital by selling parts of the business to investors. How much money a business needs, what the funding is needed for as well as how the business is organized are just a few things that influence a company’s efforts in raising capital.

If it is a new business without a track record, there is a lot of difficulty raising capital from lenders or investors. So the first source of capital in this case is the available assets. Capital may be raised from savings, borrowings against retirement plans, life insurance policy, or equity in the entrepreneur’s home.

For established businesses they have a number of sources to borrow from. They can apply to banks or credit unions for loans. Small business administration can also be contacted for information on how to help business get funding. The local chambers of commerce are also very useful in helping to get finances.

However in the process of raising these finances, it is very important to take into consideration the following very vital factors;

1- How much do you need?

2- When do you need it?

3- From whom are you getting the financing?