Raising Business Capital

Whether you’re a sole trader, an entrepreneur looking to get a new business off the ground, or looking to expand your small business into new areas, or even if already established, then you’ll have to consider business capital, which is the money that you need for your venture. When a new business has limited business capital then it can be very difficult to expand, let alone launch successfully and many businesses fail because of a lack of funds, whether that is due to low initial business capital or on-going cash-flow.

Writing a comprehensive business plan will help you work out just how much business capital you should need to make a success of your business venture and this initial planning is the corner stone of success for many businesses. However if your business plan is telling you that you need to generate more business capital then you’ll need to explore what options that you have.

Business Capital and Business Experience

Whilst there are a lot of ways to raise various types of capital, such as business capital - some of these ways such as grants or business loans can be difficult or unlikely to succeed due to the restrictions imposed by the organizations providing the business capital.

Traditionally businesses might have considered getting a credit card increase or going to their bank for a business capital loan or even an increase on their credit line overall, but banks and other financial services have become stricter on their lending criteria and are less likely to loan money to an entrepreneur who has not got a perfect or long track record. This limits small or new businesses from the start as financing options are often based on history and so a more short-term solution is needed.

At the same time, a business loan from banks would not be of much benefit otherwise, whereas business capital and angel investment can not only have a better rate, but also come with knowledge and experience that the person or investment company has (whereas who knows who you would get from a bank's customer service department!) - it will likely be in your sector and therefore have a better idea on how the amount of money needed will be allocated.

Luckily business owners do have other options open to them, such as private investment and in many cases this option make more sense for a new business in the long term. Whilst any investor will expect the business they are investing in has a solid plan behind it, entrepreneurs may have a better chance to gain the vital business capital that they need. Entrepreneurs may also gain other advantages such as making strong business contacts or getting advice and help from their investors, which many traditional lenders will not be able to provide.

Benefits for Small Business Owners or Global businesses

The advantage of private investors is that they will have a better idea on what your business needs from the loan. Investment is based on various examples of capital, such as working capital which is your operating value overall (assets minus liabilities) rather than your bank account or real estate (also crucial, as many new companies share spaces or work from home - even more so post-Covid).

For a new business - you might also want to look at raising venture capital, which is a common form of private equity financing. Or equity capital such as generating initial shares for your business, initially providing it on a private basis.

While you will need to be on top of all financial statements overall, our Angel Investment Network can help you connect with potential investors locally in Australia or abroad. Sign up via our application process below, whether an investor or an entrepreneur today and learn about how AIN can help generate investment funds whether seeking additional funding, or funding other businesses.