6 Ways to Increase Startup Capital for Your New Business in 2022
Americans are increasingly looking to start their own business, with about 29% citing being their own boss as the main motivation when leaving the labor market for good. The latest statistics from the US Small Business Administration revealed that there were more than 32.5 million small businesses, with 500 employees and fewer, operating in the United States in 2021.
While the pandemic may have triggered the Great Resignation and left a sense of entrepreneurship, Americans are looking for ways to generate and grow start-up capital for their small businesses.
According to data published by Kabbage Inc. in 2019, around 65% of entrepreneurs said they didn’t have enough money to start a business. Additionally, over 98% of current entrepreneurs say they have enough capital to survive the first 18 months.
Financial stability and security of capital are essential to survive the first months after starting a business. So entrepreneurs are thinking about new and innovative ways to raise capital for their businesses, using both a combination of traditional and modern approaches.
Here are some smart ways to raise capital for your new business in 2022.
Most entrepreneurs will probably dive into their savings and personal finance when starting a new business. This is the most common method of financial revenue growth for any new startup according to Forbes.
Using personal savings can help in a variety of ways, the most important being that they are available immediately without having to go through additional administrative procedures. Other than that, using your savings can also help you plan more thoroughly, as you end up with the mindset of using your own personal finances and not someone else’s. .
Many entrepreneurs should take this into account when using their savings to ensure that they are putting enough savings aside to cover their personal expenses. This may mean that the initial amount you can use is slightly lower, but it also gives you a sort of safety net.
Find an investor
Bringing in private investors, sometimes called “angel investors,” can quickly drive up financial start-up capital. While this can be extremely beneficial for the business, however, it comes with additional issues.
Before accepting any form of investment, entrepreneurs are advised to review the agreement and the grounds for capital funding. While some investors will only ask to own a percentage of stock in the company, some may ask you to offer them a larger stake in the company and its operations.
There is both a winning side and a losing side to using angel investors, but in most cases entrepreneurs have found that those who end up investing in their business and see the potential can help to build and establish a network of contacts, to create financial stability for the company and to generate influence in the market.
Leverage social capital
You may never really know what it’s called, but social capital involves using personal contacts such as friends and family as potential shareholders and investors for your business.
Friends and family members who can help finance the initial capital can be a valuable asset to your business. It is also possible that some of them can help in another capacity, other than just an investor, and can contribute to the operational aspects of the business during the first months or years of start-up.
It comes with a risk factor though. Many modern entrepreneurs have shared that mixing business with friends and family can strain relationships. Borrowing money, in any form or capacity, from friends and family means you are more committed to making the business successful and being able to repay them.
Think about what would happen to your relationship with your friends or family members if you were unable to repay them? While this may be considered a “last resort” type solution, be aware of how this can impact the entire dynamic within your business.
Small businesses and niche businesses use crowdfunding initiatives and platforms as a way to raise seed capital. Crowdfunding is about using the general public to fund and support your business ideas.
There are several crowdfunding platforms available, including Kickstarter, AngelList, Indiegogo, and Accion, among others.
By using these platforms, entrepreneurs essentially have to put their best foot forward and use their marketing and sales expertise to get people interested and excited about your business. One thing to keep in mind is that with crowdfunding, those who have sponsored some form of capital for your business may not expect anything in return unless promised otherwise.
On the other hand, crowdlending is where you offer a service or product in exchange for their capital effort. Entrepreneurs can use either, but it is strongly advised to consider the terms and conditions they create for themselves when embarking on a crowdfunding or crowdlending business.
Government grants and support programs
Most developed economies will have some sort of government-backed support system that can help small businesses and entrepreneurs with capital funding. These programs cover a wide range of different industries, which is ideal for entrepreneurs starting a business in a niche industry.
Different categories exist and can help a range of business owners and entrepreneurs. In the United States, the federal government offers grants and support programs for entrepreneurs through the Women’s Business Center, Veterans Outreach Business Center, minority-focused business grants, and entrepreneurs from previously disadvantaged groups.
These can help boost your capital funding, but getting approved can take some time, as there are a host of different procedures you need to go through and complete before you can receive a grant.
It’s also good to consider that even if you don’t receive much of the capital funding, these programs won’t necessarily require you to repay some of the money, but there are prerequisites that you will need to meet when applying. Requirement.
Offer a service
Some companies may choose to use their services to create a flow of capital. This involves the owner purchasing the equipment needed to create and deliver a certain product or service. Through the sale of services and goods, entrepreneurs can now increase their funding and purchase additional equipment or goods.
It’s not a conventional way to start your business, but many entrepreneurs find that working like this helps them offer their services and products at an early stage, and as demand increases, they can improve their offering. It requires minimal upfront outlay, and right off the bat, you may be able to make a profit.
Although starting a new business or being an entrepreneur can provide you with greater flexibility and entrepreneurial freedom, financial factors that come into play throughout the business process should be considered. initial start.
Entrepreneurs can use a combination of the aforementioned methods to generate capital for their business activities. When looking at how your business will be run, it is advisable to have a realistic financial goal, and from the start to work with what you have, even if this means calling on personal savings.
Finally, be creative in how you can turn your products or services into profit right off the bat. This way, you will have a clear indication of how to prioritize future business purchases, which will increase the usability of your start-up funding.
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