While getting a loan from something like a bank is a great indicator of the potential your business has to succeed, a bank loan isn’t the be-all and end-all of raising capital for your business or venture. I would personally go as far as saying that seeking a business loan from a bank should be your last resort, but apply for one in any case, firstly because you might just get approved, and secondly, even if you’re not planning to take a business loan from a bank, the mere fact that they’re interested in lending you the money is a great indicator to use for the possible success of the business model you want to execute.
The reason why I tend to advise against rushing to the banks for a business loan however is that there are simply much better ways of raising capital, one of which ways is leveraging the power of your personal network. With banks or with any other form of funding (aside from putting up the money yourself, which you probably don’t have if you’re looking to get funding), you will ultimately have to pay back the loan with interest. This means you’re effectively taking on some debt – debt you’ll have to repay whether or not your venture succeeds, which is why they ask for some kind of solid surety.
On the other hand, leveraging your personal network can open doors to various opportunities. For instance, we’ve all heard of bridging loans, they provide a short-term financing solution, often secured against an asset, to bridge gaps in funding quickly. Your personal network, including friends, family, or business associates, might be willing to provide the necessary support and act as your loan provider.
When it comes to leveraging your personal network to raise capital, casting a wide net is often key to success. Reaching out to many people within your network increases the likelihood of finding individuals who align with your investment goals and resonate with your vision. Whether through social media, email, or direct communication, it’s crucial to articulate your proposal clearly, highlighting the potential benefits and showcasing your passion for the venture.
A well-crafted direct mail campaign can also be a powerful tool to engage potential investors. Consider partnering with direct mail services in Lancaster, PA, or similar services nearby, to create impactful, personalized messages that convey the unique value proposition of your investment opportunity. By tapping into various channels and utilizing professional services, you maximize your chances of connecting with those who share your enthusiasm for the project, ultimately fostering a successful capital-raising campaign.
However, it’s crucial to approach this avenue with transparency and clear terms to maintain healthy relationships. While bridging loans can offer timely capital, uncertainties are inherent in any venture. It’s essential to know your options if you can’t repay your bridging loan. Being informed and having contingency plans in place ensures that your fundraising efforts contribute positively to your business goals without compromising relationships or financial stability.
Now, things work a little differently with the likes of angel investments, so what I’m getting at is raising capital in a way that will have that capital coming in as pure profit, taking absolutely nothing away from the contributors to that capital pool. Let’s explore it with a simple example, shall we?
First, you would proceed to build your network or leverage one that already exists, like perhaps the 300 or so of the 600-average number of Facebook friends you have who live within touching distance. Survey them to find out what it is that they all buy in common, such as how everybody buys bread every day and then proceeds to become the supplier of their loaves of bread each morning, perhaps delivering door-to-door.
You would stock the bread with pre-collected money and then keep the profits, in this way watching your capital pool grow very quickly as pure profit!
Ultimately, what your practical simulation of small business budgets in this way does, using data which is as close to reality as possible, is it ensures that you can make a growing success out of the implementation of the business you will have started, following the funding you managed to raise through the leveraging of your personal network. The reason why it’s important to emphasise a growing success is that as is the natural course of action, many of those people in your personal network from whom you will have raised the capital are going to want to follow suit and effectively saturate that capital-raising source.
So you now have the template on how to raise the capital, effectively from nothing, but once you have it in your possession then you need to deploy it wisely in order for you not to have to try and start all over again. By then, as suggested, the market will have already been saturated.
