One of the major challenges of starting or expanding a home based business is lack of sufficient capital. But if you have a good business idea, you can overcome this challenge by finding out the most suitable strategy of raising capital for your home based business and applying it. You can use any or a combination of the strategies below to raise capital for your home based business
Strategies for raising capital for your home based business
Family and friends
Many people overlook family and friends not knowing that they can be their biggest and most convenient financiers for home based businesses. People make the mistake of approaching family and friends inappropriately with the assumption that they will easily give them money because they know each other well. To raise capital from family and friends, pitch your home based business idea to them the way you could do to any other potential investor or lender. Have you business plan, facts and projections prepared and show them your seriousness and commitment to make the business successful.
Getting a loan from a bank, credit unit or other financial institutions is another reliable way of raising capital for your home based business. These loans are given at an interest rate and most local financial institutions are willing to give loans to local entrepreneurs. If you decide to borrow a loan from a financial institution, get your business plan and paperwork ready then approach the lender. You will also be advantaged if your credit rating is good.
These are small loans that are faster and easier to get compared to traditional loans. The loans are meant for businesses that have limited access to other funding sources. You can raise capital by approaching Small Business Association (SBA), which can help you with resources on how to get a business grant or microloan from third party organizations and businesses.
This has become one of the latest alternative ways of raising capital for different types of businesses, including home based businesses. The method entails raising capital from the general public, mainly individual investors, through the internet. Crowdfunding can be donation-based, reward-based, equity-based or debt-based, hence it is you to choose which one to use. When using this method, you need to prepare your business plan, pitch, projections and provide all necessary information. You should also look for a crowdfunding site that meets your specific business niche. Most importantly, you have to market and promote your business idea and fundraising campaign so as to make it visible to many people and attract many potential investors.