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2013-05-07 00:00:00Money & FinanceEnglishHow To Raise Additional Capital: Venture Capital, Bank Loan, Trade Creditors, Pros and Cons of Bank Loans,Pros and Cons of Bank Loans. To Raise Additional Capital

How To Raise Additional Capital

2 min read

Have a dream? Bootstrap. And that’s what you did. You have bootstrapped (Read about Basics of Bootstrapping) your way into the world of entrepreneurship, building it brick by brick, client by client, an employee by employee. And now, when you have your feet firmly in your operations and business model, you are ready to take the next leap – that of growth and expansion.

How then should you go about raising the additional capital? We discuss it here –

Bank Loan: Most entrepreneurs, even to this day, first think of loans from banks when they are in an expansion mode. Such loans are appealing since neither your ownership is diluted nor is your freedom curtailed. However, taking loans from banks do have their own pros and cons. Assess them before you go for it. Here’s an insightful article on the subject – Pros and Cons of Bank Loans

Venture Capital: The red hot sector in modern India, venture capitalists, offer a lot more in expertise and experience over and above the money they invest in you. Should you be willing to ‘expose’ your business to investors, getting venture capital funds should be your answer. Read about the availability here – VC Firms in India

Trade Creditors: You may also want to tap your creditors for the services, supplies, raw materials or even finished products you buy from them. Negotiate longer credit periods to cut down on your entrepreneurial finance.

This will give you the liquidity that you need so badly for your growth plans. No matter the source of funding that you may finally choose for your additional capital requirements, you need to keep a few basics right so that investors/lenders ‘park’ their money with you.

• Be ready with a focused funding proposal. Include details of your business plan, important numbers, and forecasts of revenue growth and financial viability. • Have you had a clean credit history so far? It is perhaps the most important factor that will be considered by your prospective lenders when they decide whether to invest you or not.

• Do a market study to understand the prevailing terms and conditions in your line of business. You wouldn’t want to get a raw deal, would you?

• Along with the point above, make sure you are well aware of the industry jargon. Ignorance on the terminology can cost you dear when you are negotiating the finer lines of your loan.

• Finally, sign nothing before you have taken a qualified opinion from someone trusted and knowing. A legal scanning of the document will also protect you from lop-sided agreements.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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