How to Raise Capital for Starting your own Business
In today’s fast-paced world and ever-changing market, there are so many business opportunities you can take advantage of.
But before you can start a business and exercise your knowledge in marketing, managing your team, or business operation, you first need money.
The biggest misconception is that to be an entrepreneur, you need to have millions in your bank (sana all), or at least be born with a silver spoon in your mouth (not literally, of course).
Spoiler alert: you don’t need to have any of those to think of a business idea and actualize it.
This is exactly why you should understand the fundamentals of raising capital – a process that can both be exhilarating and frustrating
If you’re ready to invest time, effort, and hard work into seeking capital, this guide can help you through the process.
6 Best Ways to Raise Funds for your Business Idea
There are tons of ways to raise funds for your business, whether you need a few thousand or a couple of million pesos.
For this guide, we will only focus on tried and tested methods that have high chances of success. This way, you will be able to get your business off the ground in no time finally.
Crowdfunding is one of the most popular ways to raise capital for your project. This is when several people pool money together to fund a business.
Thankfully, you don’t need to look for numerous investors manually. Technology has made crowdfunding easier for budding entrepreneurs like you to find future investors online. This can be done easily through platforms such as:
Founded in 2015, Investree is the leading fintech company in the country that caters to small and medium-sized businesses.
Currently, it has helped over 1,400 businesses fill their financial gaps. Investree’s interest rates vary from 1% to 3% per month. For the tenor, it can be anywhere between 2 weeks to 180 days.
To apply for financing, sign up here and fill up the form on their website. An Investree staff will contact you in 24 hours and consolidate all your requirements. Within 3 business days after your application is completed, they will send you an offering letter. It’s up to you whether you accept this or not.
SeedIn has cemented its name as a leading crowdfunding platform in Southeast Asia. If you’re looking for short-term financing to fund your business, this is a great option. Currently, SeedIn has funded over 250 projects. They are known to approve requests more than traditional financiers such as banks.
To apply for SeedIn financing, register for an account here. Then, wait for a SeedIn staff to contact you and discuss your application and options. After verifying your eligibility, you just need to sign the documentation and you can finally get your money. This entire process takes as fast as 7 days.
Cropital is a global organization that receives support from institutions in the Netherlands, Malaysia, the US, and the Philippines. This social enterprise focuses on providing farmers access to sustainable financing.
In the Philippines, Cropital has raised over Php100 million and supported over 1,600 farmers in 10 provinces.
Investors can choose to invest in any of the farms accredited by Cropital. When the farm is fully funded, farmers can finally afford the resources they need for their next harvest. After the harvest is sold, the capital will be returned to investors, in addition to the profit share.
2. Angel Investors
An angel investor is a person with a high net worth who will give you the financial backing you need to start your business, typically in exchange for ownership equity in your company.
While you may find an angel investor in your current network, this has been made easier through online platforms such as:
Angel Investment Network
This platform has a network of over 311,729 angel investors around the world, with more joining every day.
Upon signing up, you will be tasked to create a pitch for your business. What’s great about this platform is it offers incredible resources to help entrepreneurs who get stuck in writing their pitches. Once your pitch has been approved, investors can browse and evaluate it. You may also send personalized messages to investors in your niche.
3. Personal Loans
Another way you can start a business is by taking out a personal loan. Banks, cooperatives, neobanks, and other lending and financial institutions offer this financial product.
These loans vary in terms of interest rates, loan amount, repayment terms, and more. Here’s a list of some of the easiest loans to apply for to start your business.
Tonik Flex Loan
Since it launched in the Philippines, Tonik has revolutionized the way thousands of Filipinos do banking.
With the Tonik Flex Loan, you can get funding for your business without leaving your home. You may apply for as much as Php250,000, and choose up to 24 months of the loan tenure. Approval takes only 1 day, so it’s great for those who need capital urgently.
To apply for this loan, download the Tonik App. Then, register for an account and complete the onboarding process. Once done, select “Loans,” and lick “Flex Loan.” After providing all the required information and documents, confirm your loan details and accept the offer if you agree. You can just sign the documents virtually.
Peer to Peer Lending (also called P2P Lending) is a way for people to borrow money without going to a traditional bank.
Blend PH is the leading platform in the Philippines that connects investors to borrowers who need funds for a myriad of purposes, such as starting their businesses.
You may apply for the non-collateral Personal loan, or the Franchise Loan if you’re interested to franchise any of the partner brands of Blend PH.
4. Side Hustle
If you’re an expert in a particular field, you could consider running a side hustle. You could then use your sales as capital for starting your own business.
Side hustles can be something as simple as tutoring, writing your own ebook, or freelancing as a graphic designer. The possibilities are endless.
For example, if you developed an interest in baking during the lockdown (it seems a lot of people did!), perhaps you can start selling cookies, cakes, or bread to your friends.
Bootstrapping is another term for self-funding your business. It entails stretching all your finances and resources (such as your savings), without raising funds from other traditional sources.
While it’s riskier, it’s the perfect way to raise capital for entrepreneurs who want sole ownership of their businesses. This will also give them more independence to run their business however they wish.
6. Get a business partner
There is no doubt that having a partner (not in crime, though!) makes starting a project much easier. A business partner can give you a different perspective when it comes to your future business. More importantly, this individual can finance your business so you don’t have to put in so much of your finances.
A good business partner can add value to your business. On the flip side, being stuck with the wrong one can make you regret your decision for the years to come.
Considering this, remember that choosing your business partner is not something that should be taken lightly. For instance, just because a person is a good friend does not mean they could become the perfect business partner.
You must choose a business partner that you can work well with because you’ll be spending a lot of time together. If you’re not compatible with your business partner, you might end up getting frustrated, and your business can suffer as a result.
Best Practices for Raising Capital in the Philippines
Now that you know the best ways to raise capital, here are some tips and best practices that will help you get your money even faster.
As much as you can, don’t burn bridges
The business world is small. You never know who you might need to ask for help in the future. This is why it’s always best to maintain positive relationships and maintain a good reputation.
Weigh the pros and cons of each funding method to match your needs
Depending on your project’s needs, you might need an amount that is bigger or smaller than the norm. This is why you should carefully evaluate the pros and cons of each funding method so you can choose the one that fits your needs best.
Because each funding method has its perks and downfalls, take time to list its pros and cons carefully. For instance, if you have enough money in the bank and you can take on more risk, you may try Bootstrapping. But if you want an easy way to raise funds with no upfront expenses, try crowdfunding.
If you follow this tip, you’ll have an easier time acquiring the funds you need, therefore saving you time and effort.
Prioritize your story
The best entrepreneurs know the importance of storytelling. They have a good narrative about their product or service, which makes it easy for them to raise funds.
A good narrative will help you get your point across, affect key decision-makers, and make people think of you as a leader. By telling your story well, you’ll be able to deliver your sales pitch compellingly and engagingly. This is crucial especially if you’re looking for angel investors.
Get as much data as possible
Although storytelling is an essential skill when it comes to securing your capital, your story will get you nowhere without the data to back it up. This is why it’s crucial to collect as much data as possible.
How is the market for your business? Who will be your competitors? What does your target audience look like? What are the gaps you will fill in the market?
Keep in mind that data is only as good as the source, so make sure it’s credible.
Know your audience
The more you know about your audience, the better you will be able to sell your product or service to them. Make sure you understand their wants and needs, what they are passionate about, and most importantly, how you can make their lives better. This way, you will be able to shape your sales pitch in the best way possible.
Practice due diligence
You can never be too careful in business so make sure you do your due diligence to know your business partner, investor, or service provider.
The basic due diligence process involves researching the company or person’s background, examining their financial history, and consulting colleagues to know how the business partner or investor will make the business grow. If you’re using a platform, make sure to read reviews.
More importantly, don’t be afraid to ask questions. If a potential investor only offers vague answers to your questions, that’s a red flag and you should consider walking away.
Let your passion shine
When you’re passionate, it will draw people to you. Being passionate about your business idea will make it much easier for you to raise funds, as you’ll have a magnetic personality. In addition, it will be much easier for people to trust you and feel secure about investing their money in you.
Don’t be afraid to negotiate
Negotiating is a crucial part of raising capital. Keep in mind that you may be able to lower your interest rates, loan amount, or the monthly payments you need to pay if you negotiate. Your lender/investor wants to help you so don’t be shy about negotiating for the best deal.
Negotiation will help you save money. When negotiating, you should always be confident, but not too demanding or cocky. This way, you’ll be able to get the best terms for your business.
Don’t lose hope
Raising capital is not a walk in the park. You may face rejections once, twice, thrice, or maybe more. However, don’t let your failures discourage you.
The most successful entrepreneurs are always well-prepared for plenty of setbacks from early on. They know that failures are a normal part of the process. Considering this, simply learn from your past mistakes. Remember that the best leaders overcome complications by staying determined.
Jason Acidre is the Co-founder & Publisher at Grit PH – one of the fastest-growing online publishing platforms in the financial & business space in the Philippines.
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