At some point in your growth journey, your business may need a cash injection, either to launch a new product, expand locations, hire key staff, or navigate a tough quarter. Whether you're pursuing growth or managing risk, knowing how to raise capital and which option fits your situation is critical.

 

Step 1. Sell any existing assets

Before you seek external funding, explore internal options. You may already have untapped cash within your operations.

These are any items that can be quickly sold and converted to cash. If you don’t need to repurchase these items to continue to operate, you could use the money to pay for other more immediate costs.

• Excess inventory or raw materials. If you’re holding large volumes for volume discounts or production cycles, assess whether a leaner, just-in-time model could reduce your carrying costs and free up cash.
• Underutilized equipment, vehicles, or office space. If you have machines, leased property, or technology sitting idle, consider selling them or leasing them to others.
• Sale and leaseback of owned assets. For example, if you own your company’s delivery trucks, you might sell them to a logistics company and lease them back. This frees up working capital but increases long-term operating expenses, so weigh the trade-offs carefully.
• Business line or location rationalization. If you’ve expanded into new products, services, or locations that aren’t performing, now may be the time to consolidate. For instance, shutting down a regional office that’s losing money could help preserve cash and improve focus.
• If you own property, land, equipment or vehicles that are still needed, you could sell the asset to free up capital and then lease back. It usually costs more in the long run to lease an asset than own it, but you’ll get an immediate injection of cash.

When find yourself facing difficult circumstances, it may be necessary to scale back to a leaner operation to preserve the business for the future. This requires balancing the need for enough cash to survive without permanently crippling the business.

Keep in mind that liquidation values are often lower than market value, so weigh all options carefully before selling assets to keep things afloat. It's important to seek legal, financial, and business advice when making decisions that could affect your long-term prospects.

 

Step 2. Equity capital

Equity capital means raising money by selling a portion of your business. This often makes the most sense when you're launching something new that takes time to generate returns, you’re not comfortable increasing debt, your debt ratios are already high or you want strategic support from investors.

The main providers are:

• Angel investors, usually other business owners who think your business is promising and are willing to buy into your business. Typically, they invest in businesses they’re familiar with, wanting either a return on their investment, some equity, or both. They often bring experience, relationships, and a desire to help your business grow.
• Venture capitalists, usually investment companies or fund managers who provide cash in return for part-ownership of your business. They’re typically looking to invest larger sums of money, which could be above and beyond what you need, and their requirements can be tougher than angel investors.

Preparing for equity capital
Regardless of where you get the capital from, the more prepared you are the better. Before taking on equity, your business must be investor-ready. This means:

• A strong, well-documented business plan showing your growth path, financials, and capital needs. • Performance metrics (revenue, margins, customer retention) that are trending upward.
• A clear competitive advantage such as proprietary technology, strategic relationships, or dominant market share in a niche.
• Clean financials and sound operations, including internal controls, reliable reporting, and scalable systems.
• Demonstrate how you’ve protected your intellectual property and show that your business is scalable.

Speak to your business banker, lawyer and accountant about finding investors. They’ll have good contacts and advice. Make sure you’ve done your due diligence on all potential investors, so you can decide which will work best with you and your business.

 

Step 3. Debt capital

This is the most common form of raising capital. It’s money you borrow, usually from your bank or friends and colleagues. It could be short-term funding like an overdraft for extra stock, or longer-term loans for buying new equipment or a building.

Debt is often the most straightforward way to raise capital when your revenue is steady and you can comfortably handle repayment, as you’re not diluting your ownership.

Options include:

• Bank loans and lines of credit for major purchases or expansions, and working capital lines for day-to-day cash flow needs.
• The U.S. Small Business Administration (SBA) guarantees loans, reducing lender risk and opening access to financing for more businesses.
• You may be able to borrow against your receivables, inventory, or purchase orders. This can be a good option for businesses with long payment cycles or seasonal cash flow swings.
• In some cases, suppliers will allow extended payment terms during growth or expansion phases, effectively freeing up cash.

Even if friends and family are involved in lending you money, put everything in writing. Create loan agreements, define repayment terms, and involve a legal professional to avoid misunderstandings.

 

Other forms of capital raising

Although the above options are the most common, they’re not the only ones available. You could also consider:

• Exploring if you qualify for government or state funding. Typically, this comes in the form of grants. The Small Business Administration (SBA) is a great place to start.
• Checking out corporate investors, such as a customer or supplier. Large companies sometimes invest in smaller businesses if they have a stake in seeing it grow or expand.
• Crowdfunding, which is an option that’s growing in popularity. It’s usually facilitated by online platforms such as www.kickstarter.com and www.indiegogo.com. A profile of your business is posted seeking capital and then the online investor network works to raise the capital required.

You could also consider a hybrid approach where you obtain funding from a mix of the above three options.

 

Next steps

• Create a 12–24 month cash flow forecast to identify your capital gap, when you’ll need the cash, and what repayment (if any) you can afford.
• Identify which capital option fits your growth plan. Use internal resources first if possible, and match external funding type to your timeline and risk tolerance.
• Consult your banker, accountant, and legal advisor. Raising capital has tax, legal, and ownership implications so get expert guidance before making decisions.
• Develop your pitch and documentation. Investors and lenders want to see a compelling story, credible numbers, and a clear use of funds.

Raising money is one part financial decision, one part strategic. Identify if the capital supports the direction you want to go and will it make the business stronger in 3 years.