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Tips to Raise Start Up Capital

One of the aspects that entrepreneurs find most daunting is to raise capital for their start up. Today's entrepreneurs are more likely to fund the startups on their own rather than seek funding in order to hold on to the control of their business. But if you don't have the cash in your wallet, what do you do?
In order to get startup capital one should start the capital search with a good business plan that shows investors and lenders the company's potential.

Entrepreneur can find startup capital in the following ways:

    Bank Loans

  1. Community banks - offer the best chance for many small or young companies to start building a banking relationship. Small banks may have fewer products than the bigger banks, but their advantage to entrepreneurs is their flexibility.
  2. Microloans- which typically range in size from hundreds of dollars to the low six figures, are a good option for start-ups and small companies.
  3. Asset-backed borrowing - An asset-backed loan can be anything from a home-equity line of credit or an SBA deal backed up by the savings account, transactions tied to accounts receivable, contracts, or inventory.
  4. Nonbank Creditors

  5. Venture leasing- is generally available to companies that have already been granted institutional funds. The advantage to the lessees is that they don't have to raise more capital for equipment. Venture leasing is cheaper than giving away more equity.
  6. Family and Friends

  7. Asset sales - to relatives or friends can offer a good and relatively simple alternative to either loans or equity deals. What this means is the company sells one or more assets to someone the entrepreneur knows and trusts, he or she then leases those assets back to the business at a price that seems fair to both entrepreneur and the relative or friend. This helps the relative or friend to get tax deduction and regular income stream; while the company gets a onetime infusion of capital and, presumably, better leasing terms than it would have received if it had been dealing with an independent financier.
  8. Private Equity

  9. Performance-oriented, flexible terms - Equity investor receives a certain percentage of stock in return for a specified capital investment. With certain set terms, but these terms can shift, depending on how successful the business is in meeting agreed-upon goals according to a fixed set of deadlines.

  10. Redeemable preferred stock- The preferred stock may, be structured so that if an IPO takes place, investors will receive the full value of their original investment plus stock at exit time.
  11. Public Equity

  12. Investment or commercial-banking links- If the entrepreneur connects with an investment-banking or underwriting firm that is affiliated with a commercial bank, then the possible scenarios can be planned. The company could be taken public if the markets happen to cooperate. But if deal valuations drop below an acceptable level, or investor interest in your industry begins to look shaky, then the banker can use his influence within the organization to negotiate an interim line of credit to tide the business over until an IPO can be made possible.
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