How To Get Access To Capital For Entrepreneurs While Starting A Business

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Lack of access to capital for entrepreneurs or money for business occasionally is defined as a primary hurdle for building a successful business.

Access to funds is a difficult step for any entrepreneur while starting a business.  According to a report, it is also even a big problem for American entrepreneurs.  In this report, we will explain to Entrepreneurs how can any Entrepreneur can gain access to capital.

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Analyzing the requirements of capital.

When entrepreneurs want money to be invested in their idea they should analyze the requirements what amount they need for their business so they will be in a better position when interacting with investors.

You can also use a spreadsheet to analyze the requirement of the investment amount. Bear in mind cash is a lifeblood for any business. When you analyze the situation keep these three principles in mind while approaching the capital source.

For example, you have a product and you need money for marketing or you need money for keeping your operations active on a daily basis or it can be anything for anything related to your business operations.

These three principles you should keep in mind.

More cash is better than less.

Sooner cash is preferred than later cash

Less risky cash is better than more risky cash.

Tip: Smart entrepreneurs raise capital when the business doing well in the market.

Timing For Access to Capital

Timing is critical while looking for the capital. Don’t wait until you get the worst cash shortage situation.

The stage of a startup is also important when applying for funds. Required funding may be challenging in the early time of the startups.

The stages of startups are as follows.

Research and development stage

Seed stage

Launch and growth stage

High growth stage

R&D stage:

This is the time when your idea may not acceptable for many investors and you will face challenges for getting access to capital. At this stage as founder, you may have to use your savings or your family can help in your startup.

Seed stage: 

Seed money or seed funding is a common practice among entrepreneurs. This stage refers to the period when the startup is in the early stage of doing business in the market. This is the time when your idea become reality, your audience and small investors notice your business. There are many programs available by the US government and other startup incubators available worldwide for help.

Launch and Growth Stage:

When your startup is in the early growth stage and cash flow is in your favor after few months or a year after starting a business. This is the right time in my opinion to get access to capital for entrepreneurs.

You can contact large venture capital firms for investment. This time your startup can get millions from the VC firms.

High Growth Stage:

The time when your business achieving the high targets and you have created an industry giant in your niche. Initial Public Offering commonly referred to as an IPO will help you to get a large number of funds from the public by selling the company’s shares to the public, this access to capital approach for entrepreneurs can give your business a new height if you apply the right entrepreneurial approach.

Investors Types For New Entrepreneurs.

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If you are a new and young entrepreneur and have no previous experience or you are not a serial entrepreneur you may get a little more difficult while raising capital.

Here are some types of Investors for raising capital for the startup.

Friends and Family

Angel Investors

Startup Grants

Venture Capital Firms

Loans

Friends and Family.

The easiest approach for you as an entrepreneur for your startup is to contact your friends and family for raising funds at a very early stage of your business. This is a simple process and you can get access to capital very easily. After signing the basic formalities you can get cash in your hands for surviving in the early stage. The good in this type of investment is that you can give the money back with some profit and you are not required to offer partnership in your business for a long time or for forever, but it depends on your circumstances.

Pro Tip: Preserve your personal finance as long as you can and as much as you can. You can use that while you are in a serious low cash problem.

Angel Investors.

Angel investors are sometimes known as informal investors are those who have achieved wealth from their gains in the stock. They may be private funders with high net worth who can invest in your startup at the seed stage. According to the report, angel investors have invested $26 billion alone in 2006 in a small startup. These investors may invest alone or as syndication with other wealthy individuals.

Usually, these investors are experienced and understand the game. Their help and advice can grow your startup with significantly high speed.

The internet made it easy to contact these types of investors.

Here are some resources that may help to get access to capital.

garage.com

AngelList

magnitt.com

springboardenterprises.org

eileenfisher.com (Especially for women)

Startup Grants

The world has been changed and more opportunities are available for everyone. The overall purchasing power has been increased people are better than all over the world as they were used to. Internet and technology are playing a major role in the advancement of society overall.

Numerous examples are available for success and growth. Hence the government and the other institutions (public-private partnerships) intervened for backing the businesses to promote more entrepreneurial activities. A startup grant is monetary funding from the organizations or the government to help your startup. The good thing is that most of the time you are not required to pay this money back, but there are certain conditions before awarding the grant for your business.

Here are some websites for startup grants.

Grants.gov (USA)

Europa.eu (Europe)

Nicpakistan.pk (Pakistan)

startupindia.gov.in (India)

Venture Capital Firms

The word venture suggests that this type of capital involves a degree of risk. This type of investment is not like a bank loan or any other loan. These firms take a chance in your business, with some potential risks, therefore they always looking for a better ROI. This type of investment required more work and energy of entrepreneurs as they are asking for a large amount of money in their business.

The whole investment process complete in many stages, throughout the process these firms can add value to your business in several ways.

Evaluating new business opportunities

Management consulting

Growth strategies

Exit negotiations

Alliances

IPO

Few are the famous VC firms that can invest globally.

Accel

Andreessen Horowitz

Benchmark

Index Ventures

Sequoia Capital

Bessemer Venture Partners

Founders Fund

GGV Capital

IVP

Read about the venture capital firms

Loans

Although loans are not easily available for startup companies. It is also advisable don’t go for that. As we all know that there is a high risk involved in startups and banks and other financial companies are not tolerant at all of the loans. The other side is that not all the debt financing sources are not interested to offer the loan for startups. They are normally investing in successful businesses with significant earnings.

Factors that the lenders want to know while evaluating the business for loans.

What do you sell?

Whom do you sell to?

How do you buy?

Whom do you buy from?

Do you make money from your business?

The capability of repaying the loan

How much money do you need?

Assets evaluation.

Pro tip: Lenders are also looking for the track record of your management team.

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