According to a recent survey, the majority of activities in most businesses fail due to a lack of funds. Money is often said to be the fuel for any business; just as you can’t drive a car without gas, you can’t run a business without cash.
When beginning a new firm, every entrepreneur thinks to himself, “How am I going to raise money for my startup?” Obtaining a business loan is a difficult undertaking, but there are many more possibilities accessible now than in earlier decades.
Here, we’ll go over the 7 most frequent ways for raising money for your business and getting your startup funded.
The initial investment made by entrepreneurs should be the first step in their entrepreneurial journey.
Any investor who is considering investing in your firm will want to know how much money you have put into your idea, and giving money to your own startup is a positive sign for your company.
This isn’t the most efficient way to raise funds for a startup, but it does give you complete control over your firm, so it’s considered a good option.
If your firm is still in its early stages, you can use this method to both establish and grow your company, aiming for a higher valuation while leveraging capital.
Friends and Families
When launching a business, most people prefer to get funds from family and friends who know them well. It is an appealing source of startup capital.
You must remember that if you accept the fund, you must provide them with a piece or percentage of your startup stock.
If you began your business with the support of family and friends, you have two choices at that point: either accept their investment and provide stock in your company or take a loan from them and repay the money with interest later.
Make certain that your friends and family members will become owners of the company if they invest. By the way, once you’ve paid off the loan in full, you’ve completed all of your transactions.
However, it is cautioned that if done incorrectly, it might not only destroy your business but also have a long-term impact on your social life. It’s also very unusual to believe that hostility and lawsuits stem from obligations owed to friends and family.
If you want to start a business, you can get a bank loan to help you get started. For small and medium-sized firms, bank loans are the most prevalent source of capital.
Before you borrow money from a bank, you must provide a guarantee, such as your house documents or any other personal property.
A bank loan is not a safe alternative since if your startup fails, you will lose all of your assets, including your business and any other assets. Almost every Indian bank offers SME financing through a variety of schemes.
The goal of the CGTMSE scheme is to help first-time entrepreneurs to start SME and MSME businesses. You should apply for an MSME loan. MSME is a government programme whose major purpose is to provide benefits to small businesses so that they can compete in today’s market.
You have to fill an online application form for MSME loan registration. You can also opt for NBFCs such as Ziploan.
Angel investors are rich individuals who invest in business start-ups in exchange for stock. The government actually encourages angel investors by giving tax breaks, which often help to mitigate all of the high-risk situations.
Angel investors are wealthy individuals who are eager to put their money into new businesses and provide business loans. They also collaborate in networks to display suggestions collectively prior to investment.
They provide you with funding as well as advice on how to run your firm. Many significant companies, such as Google, Yahoo, and Alibaba, were founded with the support of angel investors.
This type of alternative investment usually entails lowering the early stage of growth, with investors anticipating equity to range from 20% to 40%. They choose to invest with greater risk in order to achieve larger profits.
It is critical to understand that venture financing is not required for all entrepreneurs. You should recognise right away that venture capitalists are interested in technology-driven enterprises and companies with strong growth potential in fields like information technology, communications, and biotechnology.
Venture capitalists’ main goal is to find promising companies and provide them business loans in order to assist them to accomplish high-risk projects.
This may entail transferring some ownership or equity in your company to a third party. Venture capitalists anticipate a high return on their investment, which is common when a company begins selling stock to the general public.
Look for investors who have relevant experience and skills to add to your company.
Non-Banking Financial Companies (NBFCs) are businesses that offer financial services and banking services but do not fulfil the legal definition of a bank.
They are governed by the Reserve Bank of India’s banking laws and provide banking services such as loans, credit facilities, TFCs, retirement planning, investing, and money market stocking.
They are, however, prohibited from accepting any type of deposit from the general public. These groups play an important role in the economy, providing services in both urban and rural areas, and awarding loans to help new businesses expand.
ZipLoan is a Non-Banking Financial Company (NBFC) that specialises in small business loans ranging from Rs 1 to Rs 7.5 lakhs. Despite India’s fast commercial growth, ZipLoan recognises that access to finance remains a significant barrier.
Crowdfunding is another option for raising funds for your firm. The fastest and safest approach is to use a crowdfunding fund. Because no one is asking you to return the favour.
They just care about the product or service you promised. Crowdfunding may be an alternative for you if you need money for your firm as well as personal funds.
Anyone who believes in your campaign and your idea can donate or lend it to you once you’ve created it and presented it.