Five Ways of Raising Working Capital for Businesses

Working capital – a metric that determines numerous things in the business ranging from operational efficiency to financial viability, is one of the most important elements that govern the day-to-day functioning of a business. It is thus critical for a business to ensure that a constant stream of working capital is available to maintain these daily operations.

There are various avenues for a business to raise this working capital:

Bootstrapping

If the business in question hasn’t even been set up yet, then it is close to impossible to obtain working capital from third parties. Without showing any business operations in the past or setting up a definitive long-term plan for the future, there is no appeal for any investor to have a vested interest in the business as a whole. Thus, the founder(s) of a business generally tends to fund working capital from their own pocket.

The fact that the founder(s) has tied themselves to the business is a positive sign that will attract further investment down the line and is recommended for companies that are just starting out and don’t require capital from the get-go.

Crowdfunding

In recent times, connectivity has become a universal concept with the advent of the digital age. It has become incredibly trivial to connect with people all over the globe – a reality that has promoted the notion of crowdfunding in modern times to finance the operations of a business.

There are various platforms like Kickstarter, Indiegogo, and GoFundMe – among others – that provide a platform for businesses and entrepreneurs to detail out their business to the general public and mention their funding requirements. After this, it’s up to prospective investors to decide whether investing in the company is a good idea.

Aside from cutting out the bigwig professionals that interfere in the daily workings of the business, crowdfunding is also an excellent marketing tool. A successful crowdfunding campaign can create a notable buzz around a product or service that was relatively unknown, thereby increasing the chances of the business venture being a success.

Business Loans

Perhaps the most tried-and-tested mode of raising working capital in a business, business loans have existed in the corporate realm since time immemorial. Providing lucrative options for entrepreneurs who want to take their business to the next level, quick business loans are an excellent option for companies that have been operating for a while. They are also generally accepted as a preferred source of funding for businesses that require substantial levels of working capital from day one.

While most entrepreneurs generally associate unsecured business loans with a ton of unnecessary paperwork, tiresome processes, and unwanted headaches, most of these technicalities have been removed altogether by new-age lenders like Clix Capital that have streamlined the loan process to be more user-friendly and accessible.

Angel Investors

One of the most prominent and well-known forms of business investment, angel investors are either an individual or a group of people with surplus funds. They seek out businesses that are in the early stages of their functioning and invest a sizeable amount of money in exchange for a share in the company.

Most angel investors provide their insights to regulate and optimise the business workings and advise the company on how to go about with their day-to-day processes. There are many prominent angel investing networks like the Indian Angel Network, the Mumbai Angels, and the Hyderabad Angels – all of whom have made a name in kickstarting up-and-coming businesses with substantial investments.

Venture Capital

A venture capital investment is a lucrative funding avenue, desired by businesses that have progressed past their initial startup phase. Venture capitalists are typically large-scale firms that make calculated investment decisions, following which they play an active role in directing a part of their business and helping it develop.

Generally, attracting the attention of a venture capitalist is a great sign of a business being on the right track for success. This, coupled with the expertise sported by the majority of venture capital firms when it comes to regulating a business, can prove to be the final stepping stone for companies to make it big. Some of the biggest and most notable venture capital firms in India are Sequoia Capital India, Nexus Venture Partners, Lightspeed Venture Partners, Kalaari Capital, Matrix Partners India, and Blume Ventures.

Working capital is a constant requirement for businesses, but raising this capital can prove to be quite challenging at times. Thankfully, the sources of raising working capital are numerous – everything from a business loan to angel investment is a viable funding option that businesses can opt for. Along with satisfying the requirement of working capital, most sources of investment also come with additional business insights from shareholders to ensure operational efficiency across the board.