Today there are many alternatives to raise money for a business. Some are more complex than others, but all of them can optimize and accelerate your venture successfully.
If you dream of operating your own business, (but your initial capital is limited), you should know the best financing channels available to you right now.
In reality, there are many useful and interesting options to finance your project, and the best thing is that all of them will bring you closer to your financial goals.
Is it possible to start a business without money?
Yes! Right now you can run a profitable business without any money of your own. It is a matter of researching the market and choosing the financing methods that offer you the greatest benefits.
In the past, you could only apply for bank loans to promote your own projects. However, now the options have diversified so that you can boost your business with contributions from third parties.
Therefore, the excuse of not doing anything because you don’t have money is a thing of the past. Right now you can transform your life and your business from scratch.
So, if your capital is low, or if you simply don’t have your own funds to back your venture, you need to expand your funding horizons (both public and private).
There really are many options that can leverage your business and bring you closer to the financial independence you’ve always dreamed of.
Options for raising money for a business
Today you will learn about ten options to raise money for a business without going to extreme measures or risking your wealth:
Crowdfunding, also known as “crowdfunding”, is very beneficial for businessmen, entrepreneurs or natural persons who wish to obtain financing.
At the moment there are several solid and reliable platforms in the market that allow you to expose your business idea, as well as to specify the amount of money you need to raise.
Potential investors also participate in these crowdfunding environments. So if they are interested in your project, they may contact you and offer you a partnership.
In theory, crowdfunding platforms work as intermediaries between investors and entrepreneurs (in exchange for a commission).
According to a Hubspot report, these are some of the most recognized and powerful platforms in the market:
- Funding Circle
Some of them allow you to get up to $500,000 in funding (depending on the nature of your project or the level of interest of your potential investors).
2. Financing with suppliers
Your suppliers can help you boost your project from the beginning; therefore, they can become great allies.
Your job will be to negotiate the delivery of goods and the deferral of payment. Basically, you will receive the goods in advance and free of charge.
But you must strive to sell it within the grace period given to you by the suppliers (i.e. within the period of the deferment of payment).
This is one of the oldest and most effective mechanisms for raising money for a business. It is very positive because it allows you to give the green light to your project with the capital of your suppliers.
3. Angel Investors
Business Angels, as they are widely known in the United States, have a large amount of capital and are always looking for projects or companies where they can invest it.
They are venture capitalists who can catapult your business to the top, with the purpose of receiving a part of the profits, or direct some areas of the business in which they have expertise.
If you live in the United States and want to take advantage of this form of financing, you need to know the most active angel investors according to Forbes:
He has funded more than 500 companies in more than 30 different markets and is one of the main partners of Y Combinator (one of the largest startup accelerators in the USA).
He is one of the founders of SV Angel (an angel fund that has invested in companies such as Airbnb, Twitter and Dropbox).
He is the founding partner of 500 Startups; a Silicon Valley accelerator driven by former Google, PayPal, Yahoo and YouTube workers.
This fund makes initial investments ranging from $25,000 to $250,000 dollars, mainly in Internet companies.
It should also be noted that Angels Den, Angel Investment Network USA, AngelList Venture and Band of Angels are some of the most popular incubators and accelerators in the United States.
4. Private Equity
Raising money for a business through Private Equity is a great alternative to exploit the full potential of your company.
In case you don’t know, the money injected by private equity firms to emerging businesses boosts their development and expansion on a large scale (and best of all, they don’t compromise their independence).
This strategy involves a constant injection of money, in order to guarantee the take-off of the business.
In addition, it is one of the most valuable financing mechanisms available, in terms of business relationships, experience and learning.
All the attributes of Private Equity can boost the growth of your business, make it more competitive and strengthen its innovation capabilities.
Generally, this financing is anchored to long-term equity investments in established companies and is usually carried out by specialized funds.
The value created by the investment transactions and operations results in the expansion and development of the companies (and indeed many of them end up being listed on the stock exchange).
Private equity funds are very useful for investors and entrepreneurs. For the latter, they allow them to project and promote their companies with technical and financial backing.
5. Venture Capital
Venture capital is also effective in raising money for a business. These are investment companies that are looking for companies at an early stage.
These investment funds are willing to finance these companies in whole or in part, while providing them with new knowledge to enrich the initial idea of the project.
Venture Capital is not the same as Private Equity, since the latter consists of making “small” investments in companies that are going through their initial stages of development.
Another important difference is that Private Equity can attend investments in any sector, while Venture Capital focuses on growth markets, such as:
- Energy conservation.
- Information Technology, etc.
Without a doubt, Venture Capital is very favorable for companies that do not have access to conventional financing.
6. Accelerators and incubators
Accelerators and incubators are great sources of funding (especially for companies operating on U.S. soil).
They are companies that are interested in funding startups or venture ideas at an early stage, with the objective of accelerating their growth.
In essence, they are in charge of offering them comprehensive support in terms of training, management, capital, consulting and contacts. And in many cases, they also help them to improve their networking.
It is common for insurers and incubators to be sponsored by private companies. But there are also cases in which they are sponsored by government entities.
Once the business idea has matured, these incubators are in charge of contacting potential investors so that they can finance the next phase of the project.
These are some of the best-known incubators in the region at the moment, according to a report by Platzi:
- 500 Startups (Mexico)
- EWA Capital (Colombia)
- DemoDay – Platzi (Colombia)
- Multiverse (Guatemala)
- PROCOMER (Costa Rica)
- Impact Hub (Venezuela)
- Espol (Ecuador)
- Darwin Startups (Brazil)
- UTEC Ventures (Peru)
- NXTP (Argentina)
- Platanus Ventures (Chile)
- ANII (Uruguay)
- Y Combinator (United States)
7. Partners or investors
Partnering with someone else is one of the oldest ways to raise money for a business.
The key lies in finding a partner with whom you can share the economic contributions, the workload and the benefits of the company.
It is best to partner with people who have an affinity with your project, or better yet, who have experience in their field.
Partnerships can help you boost your business quickly and easily. But you must be clear that the profits and benefits must also be distributed among the partners.
Boostrapping is a practice that consists of self-financing a company from scratch and with its own resources.
In other words, it does not rely on risk financing, much less on bank loans.
In addition, all profits must be reinvested in the company, with the intention of generating a “financial snowball” effect.
So the money for a business does not come from third party funds, but from your own resources or from the resources of your partners.
Therefore, you would be the sole owners of the company and will continue to run the business.
In addition, you will have limited or no debts, which is a great incentive for new entrepreneurs.
9. Bank loans
Bank loans allow you to get money for a business from a more traditionalist point of view.
You can apply for personal loans or mortgage loans. The latter option is usually the most attractive for new entrepreneurs or businessmen.
Wondering why? The main incentive is that the interest rates tend to be lower than those of a personal loan.
However, you should keep in mind that it will take you longer to consolidate your debt with the bank if you apply for a mortgage loan.
10. Guarantee Companies
Guarantee Companies (SGR) are non-profit entities that offer financing to small and medium-sized companies, as well as to the self-employed.
They rely on financial guarantees to back their projects or ventures, and in theory, act as guarantors of their debt.
These companies give you access to a line of credit with better conditions, either by reducing interest rates or by extending debt repayment terms.
SGRs can also benefit you with other measures. Some of the most important are:
- Leasing operations
- Deferral of payments to suppliers
- Advances on subsidies
If you wish to obtain the financial guarantee of an SGR, you must become a member and acquire shares.
However, you will be able to recover your investment when you cancel all the credit you received from the SGR.
Boost your business with good financing
You have just learned about 10 alternatives to get money for a business that will give a 180-degree turn to your project or enterprise.
So your job will be to evaluate the options that best suit you depending on the stage your business is in, the goals you want to achieve, or the amount of financing you need to get.