How to Raise Money for a Startup in 10 Simple Steps

It was 2007. I was a part owner in a private capital raising company. My 3 business partners and I were sitting around the table at a local restaurant getting some breakfast chatting about the upcoming goals. One of the major items on the agenda was “how to raise $457,000” for one of the clients we were working with at the time.

There were a number of approaches we could have taken, but we chose to go the route of using a P.P.M. (private placement memorandum).

We went through the arduous task of filing all the necessary government and legal documentation. Two months later we we’re ready to move forward with contacting people on a private-individual basis to raise the necessary funds.

There’s a lot more to that whole process but that’s the nutshell. The following info will give you an overview of some of the other capital raising methods you can consider. Many of them I’ve personally used except for crowd funding, which I might try out soon. If you have any questions leave me a comment below and I’ll get back to you!

1- SBA Micro Loans

The SBA Micro-loan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000.

The U.S. Small Business Administration provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Micro loan program for eligible borrowers.

2- S.B.A. Loan (Small Business Administration Loan)

If you were to visit with a loan officer at your local bank or credit union they could walk you through the steps and the paper work involved with determining if an SBA loan is for you.

• Banks
• Credit Unions

3- Angel Investors

These types of investors are normally people who are seasoned entrepreneurs, or even well funded doctors, attorneys, business owners, etc. The S.E.C. usually requires these types of investors to be accredited. Read more about accredited investors on the SEC website here. If your’e looking for a list of approved angel investors the angel capital association is a great place to refer to here.

4- Asset Based Loans

If you have something tangible that you’re willing to use as collateral for a loan you can consider this type of funding. You could consider putting up your waver runners, or car, furniture, or tools in exchange for a loan.

5- Peer to Peer Lending Companies

• Prosper
• LendingClub

6- 401K Financing

If you have a 401K you can consider using that as a source of funding for your business. There are some rules to follow to avoid fees so make sure to speak with your financial advisor about this.

This is exactly how I funded my first start-up in 2006. I pulled out the funds in my 401-k and took the leap! I had a starting plan though. It wasn’t a willy nilly approach. I suggest doing the same.

7- Raising capital using an LLC

This capital raising approach involves having partners in your business put up the necessary funding to grow the business. For example, if you wanted to raise $100,000 and also have partners work with you in the business…each of them could put up $20,000 each. The partners could have their own specialized roles in the business and have an equal share in the net profits of the business. In the operating agreement of our LLC it explains the ins and outs of all the “what if’s” and how you and all the partners of the business would be paid out. I recommend speaking with licensed professional if you need help with this.

• Selling Company Equity
• Capital Partners

8- Raising Money Privately

• PPM (Private Placement Memorandum)
• Blue Sky Laws

9- Using Crowdfunding

• See the List of top crowdfunding companies here

10- Credit Cards

There are some great business credit cards out there to consider using for the funding of your business. Capital One, American Express, MNBA, etc… Be aware of the interest rates involved, all the terms and conditions. Look for 0% cards. They still exist out there.

There are many pros and cons to all of the capital raising methods above. What pros and cons have you personally experienced?