Cheapest ways to raise capital for your business

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Most of us belong to the school of thought that believes that the surest way to true wealth is by having your own business. But then we all need capital to start a business. Thus that brings us to the question; how do we raise capital without getting into serious trouble?

When it comes to sourcing of funding for a start up business, most times, it is ill advised to source funds from financial institutions.

The great difficulties encountered in accessing these loans together with the stringent requirements of these institutions which include sufficient collateral, high credit rating, past business history etc., make this source of financing quite complicated.

So let’s run through some very interesting and cheap sources of finance to get your start-up running.

#1: Savings

One way of getting capital to start up a business is via savings. One could start up by saving rather than borrowing money. This means that one would have to be as frugal as possible and start up the business in its small form and then grow it organically.

In using one’s savings, we could also explore the use of additional ‘financing’ in the form of negotiating for extended credit periods, minimizing moneys owed by debtors, delaying payment where necessary, and minimizing inventory.

A great advantage of using this source of finance is that the business would belong solely to you; no pressure from friends, family or from financial institutions, thus all the gains to be achieved are shared with no one.

However, on the other hand, saving most times is seen as a restrictive source of capital as it is restricted to only one individual.

#2: Family

Another source known to man is Family. Research has shown that family members are great and prominent sources of capital provision. Most times it is free as family members rarely request for interest.

In addition, the penalties for default are lenient as it mostly ranges from suasion to scolding, if you know what I mean.

Nonetheless, unless one is from a wealthy family, the amount of money which can be realized from this source is quite limited.

#3: Angel Investors

“Angels have no philosophy but love.” said Terri Guillemets.

A third source of cheap financing is the Business Angel. Business angels are affluent investors who provide capital for business start-ups, usually in return for convertible debt or ownership equity when the business becomes profitable.

So if you have a business idea so great, you most probably will be able to find an angel to finance it.

As Thomas Edison said, "The value of an idea lies in the using of it."

So if you’ve ever had problems growing your innovative ideas into start-ups, because of poor funding, now you’ve got 3 sources of cheap finance you can work with. It’s now time to take the leap and chase the vision.

Make that choice soon and kick-start that investment which would in turn kick-start your wealth.