One of the most important factors for an entrepreneur to consider before a commercial investment is how to raise enough finance to cover the deal and to make the project successful. For this and many other reasons, it’s essential to know how to give yourself the best chance at success by knowing your options.
Before a lender commits to giving you their cash, they will want to be confident that you are serious and that you have put in the research and work to make the project a money-making success. While it would be wonderful to rely on a bank loan to fund your ventures and business ideas, in 2017 the financial landscape has altered to such an extent that it’s essential to understand the other options available. Don’t worry – as an entrepreneur, you have a wide choice of funding methods to consider, and the options are growing.
When that incredible opportunity for a lucrative investment raises its head, explore the capital-raising options below to help ensure that you have the right finances available.
- Equity. If money is sat in property, while it is a general truth that property value rises over time, you could be doing more with that resting money by using its equity to expand your portfolio or to fund a new venture or business idea.
- Family and friends. While many entrepreneurs will shy away from borrowing from friends and family, you may be surprised to discover the amount of people close to you who have money saved or generous equity they are willing to use to invest in your business ideas. If your offer is watertight and your presentation professional, you are less likely to put your loved ones and companions in an awkward position, as they will feel like a real investor being offered the chance to find success with money.
- Loans. While these may be more difficult to secure from banks in 2017, there will always be ways to borrow money with which to make those lucrative investments. In our 10 predictions for 2017 video and blog, we predicted that we would see more independent lenders appearing to invest, as a backup option whenever an entrepreneur falls short of whatever high standards a bank has set.
- Credit cards. Credit cards can offer a powerful method of raising funds. Find those that strike a balance between the largest amount of cash available and the lowest interest rates when paying it back, so that you always have funding available for when that new opportunity presents itself.
- Overdraft. When setting up a property account, we always agree a pre-approved overdraft. Without emergency methods of raising funds you may never afford that deal, so while no one ideally wants to delve into their overdraft there are times when it can make the difference between investing in a lucrative deal or allowing another more cash-rich entrepreneur to jump into the opportunity instead.
- Angel finance. An angel investor will provide capital for a business project in exchange for either convertible debt or part-ownership. Raising finances with this method is known to be the toughest to secure. Many companies having extremely strict guidelines for pitching and others simply wait to contact entrepreneurs who have a great business idea or proposition rather than invite entrepreneurs to contact them. To succeed with an angel investor or an investment company, you are going to need to market yourself clearly and effectively while making yourself as visible to the prospective investors as possible.
- Inheritance. Help parents/other family to invest now, while legitimately bypassing some inheritance tax.
- Pensions/endowments. Pensions are no longer the stable future certainty that they once were, so consider converting them into cash. Money now is better than something that may never occur, as long as the investment is stable and potentially lucrative enough.
- Crowd funding. This is a method of raising capital that we predict is going to become more popular in the future. While at present it may still seem slightly unorthodox, if you find a reputable company with a high success rate to work with, you will be more likely to find yourself in a financially healthy agreement. Just take your time and make sure that you carefully read the terms and conditions before agreeing to such an arrangement.
- Sell your possessions. It’s astounding how much capital can sometimes be raised simply by lightening yourself of a few objects. My business partner Rob Moore raised thousands of pounds once by offloading some home items that he wasn’t even using, so you may be surprised when you look at the amount you could make from selling off some not-so-treasured possessions.
Which of these methods of raising capital have proven successful for you when raising funds for a business idea? Do you have any other methods to add to our list?
If you would like to learn more about financing your investments and managing your money more effectively, take a look at my book “Low Cost, High Life” here.