Amy Rose F. Abalunan Prof.

Vincent Ray Boron

BA 206- Financial Management

RAISING CAPITAL

The ability of an individual to obtain money/funds in order to get the business off the
ground or help in the daily operations of the business such as the purchase of materials and
payment of wages etc. is known as his capital raising skills.
Other than using up one’s savings, there are usually two types of capital used by companies to
fund all such operations: debt and equity.
Debt capital is usually raised by obtaining bank loans, personal loans, credit cards or bonds etc.
Equity capital, on the other hand, is raised by selling shares of stock. Ideal capital raising skills,
however, require determining a mix of both these types such that it is most cost effective .

How to improve capital raising skills

Following are some tips that might prove helpful for improving one’s capital raising skills:

 Be realistic about the amount of capital required. Optimism is a trait commonly found
in entrepreneurs. However, the real world is often quite different than the record sales
of the ‘unique’ product as well as the slow competitors that they envision. Therefore,
the estimates about required capital should be made as realistic as possible so that
enough money can be obtained. Otherwise, you are likely to make the usual mistake of
asking for too little money for having a chance at success.

 Determine the value of your company. Since debt and equity capital are both costly in
their own ways, and determining the right mix of both is the ultimate way of improving
one’s capital raising capabilities, it is important to begin by determining the value of
one’s company. This is an important step in determining the cost of new capital when
equity additions to the capital structure are sought. Ensure a mix of debt and equity
such that greater ownership of the company is retained.

 Network as much as possible. When you seek investors, make sure that everyone in
your social circle is aware of the fact that you need money and how much. Find people
who have managed to raise capital prior to you, discuss with them your needs, and ask
for introductions. Getting introduced through a network is usually preferred by investors
as well because it means they have a trusted connection.