Ways to Raise Capital Sources
Obtaining capital source is one of the most difficult parts of any entrepreneur’s life when they tend to start up their own business (Scarborough, 2016). Capital can be described as the money possessed by the firm, which required facilitating the business activity. Raising capital sources for ventures can be a hard task and it wants lots of dedication and determination towards their work. To get great capital sources, the ventures are required to come up with a better business plan. There are so many ways in which a venture such as old road cafe Australia can raise the capital sources and they are described below.
From family and friends- In order to raise capital sources, one of the foremost steps for any venture or entrepreneur can be seeking help from family and friends. A person can always ask their family or friends for some money for obtaining capital for the business. Asking money from friends or family happen to have its own benefit like a low extortionate rate of interest, easy investments without any kind of agreement etcetera. This approach allows the venture to get the investors based only on a proposition based on the emotions or sentiment. Such loan deals are flexible and venture does not need to pay unless the business has obtained some inflows or until the venture is able to repay the sum. Although it is an easy approach the venture is required to be more careful while investing the money of their loved ones. Asking friends for help can be beneficial.
From Non- profit lenders- There are so many financing options available for the ventures or entrepreneur for the business startup like the venture capitalist, bank loans etcetera. Most of these financing alternatives charge a huge amount of money or interest rate from the ventures. New entrants are not so professional and they require time to generate some decent inflows and be able to repay the sum (Plummer, Allison & Connelly, 2016). Therefore, for such ventures, nonprofit lenders can be very helpful. This option is most suitable for the small-scale businesses; the only downside of this option is that this option is only suitable for getting smaller loans, for instance, less than $50,000, or $50,000. Although this option provides a small amount of money as a loan to ventures this option is worth looking into and can be quite beneficial for small-scale businesses. It saves entrepreneurs from high-interest rates.
From Family and Friends
Loans from a government- Loans from governments are one of the most leveraged resources in order to raise the capital for the business. Loans and grants from the government can be of very low interest and quite suitable for the ventures and the entrepreneurs. This option allows the ventures to focus more on the business rather focusing on paying the interest rates and loans. To avail the loan from the government, the venture is required to reach out to the government contracts that are present on the local level (Bruton, Khavul, Siegel & Wright, 2015). These communities can be such as, economic development offices, development centers for business development, chambers of commerce and community for small business development. The key to getting the loan from such government facilitated organizations is to show them the business will provide a great job opportunity and effective conversation. Government loans and grants can be very helpful in obtaining capital resources as per the requirements of the business.
Loans for small businesses- Most of the cities have small business administrations or their branches. A small business center can provide the loan to those who are planning on starting their business or already have started the business (Wadhwa, Phelps & Kotha, 2016). Such administrations are very much suitable for the entrepreneurs and are friendly with them as well. Small business centers also offer government loans to such ventures. Which are very lenient when it comes to the formalities or standards set to qualify the loan? Loans from these small business centers can help the entrepreneurs or ventures when they are looking to leave the ground and enhance their business (Morgan, Anokhin, Kretinin & Frishammar, 2015). This will also allow the ventures to pay attention to business by using the capital sources with the help of the money availed by the small-scale business administrations. They also provide the money with the low-interest rate. Ventures can directly talk to such centers.
Crowd-funding- Crowd-funding is one of the best approaches for the ventures in order to raise capital resources. Crowdfunding can be done with the help of online platform, which is used by the ventures to explain the detail of their project and they can ask for loans and people to invest in their project over these website platforms. Most of the ventures are not able to raise money through any other means or ways (Drover, Busenitz, Matusik, Townsend, Anglin & Dushnitsky, 2017). This medium will provide a wide range of audience and appeal to masses. This is a great marketing strategy. Most of the people who are going to expand in the business will also work as promoters of the product or business. It will also save the person from so many formalities of getting the loan and the fear to qualify the standards for getting the loan. Although crowdfunding is a great approach it can be complex sometimes.
From Non-Profit Lenders
Venture capitalists- Getting help from venture capitalists can be a little complex due to their strict terms and conditions for the investments. If the fear of qualifying standards is removed then it is a great approach for the ventures to raise capital sources. This approach is quite hardest because only a few out of many small-scale business ventures get the loan or finance out of them (Kuratko & Hornsby, 2017). For any small business to get the loan from the venture capitalist and operate the business with it, they require to qualify the standards set by the venture capitalists. Once qualified, they will be able to seek advice from the venture capitalists. They will also help the ventures by providing sound business advice and helping them with the decision making (Dawson & Henley, 2015). All they would want in return is some part of profit if the business becomes successful and starts generating good inflows.
There are so many risks associated with the business and for any venture, this is the scariest part. Major risks associated with the business of Old road café Australia are as follows:
Technological- Old road café facilitate its operations in Australia and it does not own a large chain of restaurants or café. Being a small-scale business, it requires adding so many factors to the business in order to achieve success in the business. Currently, most of the businesses are based on technology and they use the technology to get the most out of it and expand the business. Technology is the most important factor that can overcome all the complexities associated with the business (Barringer, 2015). Old road café’s biggest competitors like, big tree house café, the big break and many more have a great competitive advantage over old road café because of the great use of technology. Due to lack of funding and capital resources, the old road café is not able to make much use of technology. Let it be promotions on social media or television it all require a great amount of funding. So the lack of technology can be a risk for old road café.
Economic factors- Large businesses can easily handle the difficulties in the economic condition but when it comes to small-scale business, the situation becomes quite difficult for them to handle (Kasabov, 2015). Economy variables are very likely to affect the operations or projects related to small-scale businesses like old road café. Due to lack of resources or funding, old road café is not even able to prepare itself for any change related to the economy. This puts the old road café into a hugely complex situation, which cannot be controlled by the company. Major factors affecting the business of old road café are exchange rates affecting coffee supplied from the foreign country, inflation rates and income expenditure that comes from the people from the same demographical location (Karadag, 2015). These all factors can affect the business of old road café and can even put it into jeopardy making it vulnerable.
Loans from Government
Political factor- another factors affecting the small-scale businesses and putting them on to the verge of risk are political factors. Political factors can affect the business and its operations anytime just within the blink of an eye. If there is any kind of change in the law or the political policy made by the government then the small-scale business like old road café are most likely to get effect because they cannot afford such costly and expensive lawsuits. Lack of funds and capital resource can put them into the risky situation (Karadag, 2015). The small-scale companies are required to change according to any change made by the government. Even with increasing corruption, it is becoming harder for small business cafes to keep up with such policies. Companies have no control over such political changes or laws, therefore, they have no choice but to follow them.
Environmental factors- Environmental factors also affect the business and its operations. For instance, sometimes due to heavy raining, the crop of coffee is destroyed or is available in a very low quantity, which means that suppliers will increase the price. Small businesses cannot afford such high prices and therefore this situation is likely to affect the business of old road café. Another factor affecting the café business can be unexpected weather change in north-south wales of Australia. Due to the sudden change in the weather, the transportation services can be slow or stop which will eventually affect the business of the old road café (Spieth, Schneckenberg & Ricart, 2014). All these factors can be difficult to handle by the small-scale businesses on its own and put the business at a risk. On the other hand, all the policies made by the government for the protection of the environment does not allow such ventures to operate their business freely and put a tight leash on many operations. Due to this many ventures suffer loss and lack of growth in business. Most of the times the cafes are evaluated based on environmental aspects and due to such an evaluation, the café suffer from so many complexities.
Demographical factors- demographical factors describe the local population around the business figure. It determines all the factors like, population, age, sex, marital status, poverty, riches etcetera that can affect the business. Demographical factor put a lot of pressure on the organization to facilitate according to it if they want to succeed. For instance, there are thousands of people with different needs, therefore, the café needs to serve them with different options accordingly and if they fail to provide the customers with what they want then the business is most likely to fail (Kandachar & Halme, 2017). Therefore, all these small-scale industries require a good amount of funding and capital sources in order to provide good services and enhance the customer base. Inflows can only be generated if people really find the services interesting therefore it becomes necessary to use good capital sources and quality services. Lack of funding is really challenging for them.
Loans for Small Businesses
Legal factors- In order to gain success, each company is required to include the legal sector while making the business strategies. The company has to abide by laws of the pace or country where it is residing or operating. Old road café is a small industry as discussed above and for small-scale industries, it becomes quite difficult to spend money on such costly lawsuits without any kind of funding. All the policies associated with the environment can also challenge their business operations, therefore, it can be quite difficult for them to handle the business without any help from the venture capitalists or any business administrations for the small-scale business. There are many other policies that require spending a huge amount on their implementations and does not come optionally (Fisher, Kotha & Lahiri, 2016).
The small-scale business industries suffer a lot due to such expensive policies and lawsuits, which are compulsory for them. Risks affecting the business of old road café there are so many ways in which the business gets affected because of these risks such as follows:
- Due to different kind of laws and policies implicated or issued by the government, the ventures like old road café have to spend a huge amount of money in order to follow all these policies. A government made all these policies necessary for all the business owners (Barringer, 2015). Large industry can easily handle such things but it is quite difficult for the small-scale business owners and affect the business financially.
- Demographical factors also put a lot of pressure on the business of old road café. Due to a different kind of demands from the customers, the café has to come up with different options to serve them. While serving these different options, the café business requires different capital sources to come up with different options. This is a huge drawback because the old road café is a small scale business and without any good investor, it’s good food and beverages will not make any kind of differences (Paul, Parthasarathy & Gupta, 2017). The good team of investors can really help such businesses and without them, business facilitation is quite challenging for a small business organization like old road cafe.
- Political factors cause so many different challenges for the business organizations. Different policies affect the daily business and any kind of investments deal with the investors. Sudden changes in the politics directly put a deep impact on the business projects and operations in many different ways (Dodgson, 2018). Increasing corruption leads to changing policies every day. Those policies can be quite beneficial for large firms but they are putting the business of small firms in jeopardy. Large firms can easily pay for any kind of politics related situation but smaller organizations cannot pay such a huge amount of money without any kind of support from anywhere.
- Technology is the best way to enhance the business and many large and popular cafes like big-bekky in north-south wales use all the latest technology. Due to lack of capital resource, old road café is not able to do so and which gives a competitive advantage to other cafes over old road café (Burns, 2017). Since technology is the best way to expand the business but it also requires a lot of money which is a huge drawback for old road café. Lack of capital resources and investors is a huge downside for the old road café and puts the business into the great loss.
Conclusion
In the limelight of the above-executed analysis, it has been executed that establishing a new venture is a crucial task. The new venture will require capital and hence varied range of sources of capital that will aid the business entity in establishing and operating the business. Further, the challenges and the difficulties are also figured out that will rise as barriers for the business. At the end the risks that will be creating problems for the business venture.
References
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Barringer, B. R. (2015) Entrepreneurship: Successfully launching new ventures. Pearson Education India.
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Burns, P. (2017) New venture creation: A framework for entrepreneurial start-ups. Palgrave.
Dawson, C., & Henley, A. (2015) Gender, risk, and venture creation intentions. Journal of Small Business Management, 53(2), 501-515.
Dodgson, M. (2018) Technological collaboration in industry: strategy, policy and internationalization in innovation. Routledge.
Drover, W., Busenitz, L., Matusik, S., Townsend, D., Anglin, A., & Dushnitsky, G. (2017) A review and road map of entrepreneurial equity financing research: venture capital, corporate venture capital, angel investment, crowdfunding, and accelerators. Journal of Management, 43(6), 1820-1853.
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Plummer, L. A., Allison, T. H., & Connelly, B. L. (2016) Better together? Signaling interactions in new venture pursuit of initial external capital. Academy of Management Journal, 59(5), 1585-1604.
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