How to Raise Equity Capital
Withdraw from your savings., Use your credit cards., Ask friends and family for a loan.
Step-by-Step Guide
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Step 1: Withdraw from your savings.
You can fund your business using your own money.
This might be the easiest way to raise capital, since you don’t have to sell shares in your business to another person.
Look through all sources of money to see what you have available:checking accounts savings accounts mutual funds life insurance policies -
Step 2: Use your credit cards.
Although risky, you can extend a loan to yourself by using your credit cards.You should only use credit cards if you can’t get a loan on more favorable terms from a bank or a credit union.
Credit cards generally charge higher interest rates than private loans.
Rates are typically variable, which means that they can increase or decrease depending on the “prime rate,” which they are indexed to.
The prime rate is tied to the federal funds rate set by the Federal Reserve.However, a credit card might be your best option if you can’t find other funding, or if you don’t want to give up any control over your company. , Almost a third of entrepreneurs raise capital by asking friends or family for loans.If you want to approach people that you know, you should approach them formally as you would any private investor:
Show them financial information about your company.
For example, you can gather information about your sales and expenses, as well as projections about your growth trajectory.
Discuss new products or services you hope to introduce.
Explain how the money you raise will help fund product development or marketing.
Draw up a loan agreement.
You should have an official loan document, which is a binding contract.
You can See Write a Legal Document for Money Owed for additional information. -
Step 3: Ask friends and family for a loan.
Detailed Guide
You can fund your business using your own money.
This might be the easiest way to raise capital, since you don’t have to sell shares in your business to another person.
Look through all sources of money to see what you have available:checking accounts savings accounts mutual funds life insurance policies
Although risky, you can extend a loan to yourself by using your credit cards.You should only use credit cards if you can’t get a loan on more favorable terms from a bank or a credit union.
Credit cards generally charge higher interest rates than private loans.
Rates are typically variable, which means that they can increase or decrease depending on the “prime rate,” which they are indexed to.
The prime rate is tied to the federal funds rate set by the Federal Reserve.However, a credit card might be your best option if you can’t find other funding, or if you don’t want to give up any control over your company. , Almost a third of entrepreneurs raise capital by asking friends or family for loans.If you want to approach people that you know, you should approach them formally as you would any private investor:
Show them financial information about your company.
For example, you can gather information about your sales and expenses, as well as projections about your growth trajectory.
Discuss new products or services you hope to introduce.
Explain how the money you raise will help fund product development or marketing.
Draw up a loan agreement.
You should have an official loan document, which is a binding contract.
You can See Write a Legal Document for Money Owed for additional information.
About the Author
Randy Roberts
Randy Roberts is an experienced writer with over 4 years of expertise in lifestyle and practical guides. Passionate about sharing practical knowledge, Randy creates easy-to-follow guides that help readers achieve their goals.
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