How Can Businesses Raise Money?

All businesses, from the smallest start-up company to large multinational corporations, constantly have to worry about raising money. Fortunately, there are numerous ways to do so.

Start-up businesses without an established track record often have to get creative when trying to raise money. This can include using personal credit cards, hitting up friends and family for loans, taking out a home equity loan or using a peer lending site. A small-business owner may even resort to payday loans if he has no other option. This stage of raising money, in which the owners and founders use their personal assets, is called seed capital

Start-up businesses that have self-funded and made it on their own may be able to attract investors. There are a couple of different levels of investment that small, start-up companies, especially those in technology-related fields, may attract.

Angel investors are usually wealthy investors who invest, individually or in groups, in promising start-ups. Rather than treating the money strictly as a loan, angel investors usually take an equity stake or a convertible debt stake in the company.

Venture capitalists also invest in promising start-up companies, but they usually invest money that they are managing as part of a fund, rather than their own money. Venture capital investments usually come later than angel investments, and the investors also take an equity stake in the company.

As a business grows and becomes more established, it is more likely to be able to get credit from a bank. This may come in the form of a fixed loan or a revolving line of credit, which the business can tap at any time, as long as there is open credit remaining.

Larger, more established businesses also often offer equity stakes in the company to attract investment. These are similar to angel and venture capital investment, but when the business is more established, it is in a better position to dictate terms. Businesses often issue stock, either privately or publicly, that investors can bid to get in on. When a company decides to sell public stock, it must register with the Securities and Exchange Commission and do what is called an initial public offering, or IPO. Companies usually only do this once they have reached a certain size, because going public severely dilutes the ownership of the company.

Source: http://brandingrband.com/how-can-businesses-raise-money/366.html

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