How to Raise Capital to Start a Corporation
Corporations cannot do business without borrowing money. There are many ways to start up a firm. Methods of raising money range from borrowing from a bank to issuing bonds or stocks or seeking financing from venture capitalists.
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Things You'll Need
- Company registration certificates
- Business plan
- Bank account
- Venture capital database
Instructions
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Write a comprehensive business plan. Design a practical business model demonstrating your knowledge about the market your business will be catering to. Make financial projections in your business plan. A market strategy should also be included. Use this business plan to raise money for your startup corporation.
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Plan for start-up costs. Expenses such as incorporation, insurance, utility bill payments and communication, among others, are almost immediate, usually before the company gets loans or venture capital.
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Present your business plan to investors. Venture capitalists usually take on very high-risk investments, such as new companies. Meet as many potential investors as possible, and be prepared to explain how you arrived at the amount of money you are asking for. Show them that you have done your research and that in a specific period of time you will start making money. The quality of the founding team is important to investors.
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Issue bonds if you want to borrow money at a lower interest rate when your corporation qualifies to do so by law once it starts running. By issuing bonds you are borrowing from the public. A bond is a written promise to pay back the money at a specific date with interest. You need to assure investors that your company has the means to pay interest on bonds it records as losses. Selling company stocks is another option.
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Tips & Warnings
Look out for the so-called angel investors. Angel investors are people who invest their own money in companies.
You need to understand the economic cycle before you seek to raise money. In good times, there is always a huge supply of money in search of higher returns. Launch your company, if possible, in good economic times because it will be easy for you to raise capital.
References
Resources
- Photo Credit billion dollar corporation image by Augustus Saxton from Fotolia.com
