Whether you are a small business owner or planning to start a new one, you know how important funds are. Many businesses fail within the first year of their operation because of funds shortage. You need adequate capital for not just business operations but also to maintain a healthy cash flow in your business. By raising capital for your business, you can ensure its growth and success. There are many ways of raising capital for your business in Australia.
Traditional methods of raising capital
Family and friends
Most young entrepreneurs start their businesses with the help of their parents, relatives, or friends. It is often the most common method of arranging capital. Family and friends may provide funding to start a business if they appreciate your business idea and have trust in you.
This is another popular method of raising capital for your business. Term loans from commercial banks are available for a period of up to 5 years or more depending on the financial assistance provided. However, you need to provide your financial statements and a business plan that is feasible and you should also be able to convince the financial institution that your business plan will generate profits in the future.
If your business depends upon equipment and machinery to produce goods, you can apply for equipment finance from a bank. You can use this loan to purchase equipment for your business.
A business line of credit
This is a good way of raising capital for your business. Under this arrangement, a bank issues you a line of credit and you can use the money according to your needs. You pay interest only on the amount of money you withdraw and you can repay the money in a lump sum or in installments along with the interest later on.
Grants for business owners and entrepreneurs are an important source of raising capital. Grants are available both from the federal as well as state government for start-ups and also for the growth and expansion of an existing business. You can check out these grants and apply for financial assistance depending on your eligibility.
Innovative ways of raising capital
Crowdfunding is an innovative way of arranging capital for your new business. There are many platforms such as Fundly, Indiegogo, and Kickstarter where you can launch your campaign and request funds. If your business idea is innovative and captures the attention of the investors, they may contribute to your capital.
There are many funds operating on behalf of individuals, foundations, and business houses that provide capital to start-ups and small business owners. You can raise capital through these venture capital funds for your business. These funds also bring in the expertise to help in the growth and expansion of a business.
Angel investors are businesses and entrepreneurs that are willing to invest money into your business if they like your business idea and believe it can become a success in the future. These angel investors have lots of business connections to arrange most of the resources required for your business.
There are many sources of funding for your business outside your family and friends. You can approach banks, apply for grants from the government, or try innovative methods like crowdfunding, venture capital, or angel investing to secure the capital needed for starting or expanding your business. However, you need to have a solid business idea or expansion plan that can convince the investors that it will reap benefits in the future.