A small business idea begins with the hope of success. It does not matter which field you choose. The most important aspect of a startup dream realization is to find sufficient funding. Without funding, your business would not grow or even start, for that matter. It takes sufficient financial support, such as a business loan, to convert an idea into a product or service, generating profits for the small business owner.
There are many ways through which you can obtain startup capital for your business. You can select according to your choice and suitability. Getting a small business loan can get easier with the options discussed below.
10 Funding Options to Raise Startup Capital for Your Business
Given below are ten funding options through which you can raise startup capital for your business.
1. Self-Funding/Bootstrapping: If you have a lot of friends and a large family, share your startup ideas with them for a small business loan. Explain your vision regarding your small business expansion. This way, you would be able to raise money on your own without seeking outside assistance. Self-funding or bootstrapping is a method of startup financing that is the most suitable for those just starting their business.
This method has a lot of advantages. Using your own money for your business gives you a sense of belongingness with your idea. If you have your seed capital, it becomes easier to rope in investors as your business gains credibility. However, this method is only possible if your requirement is little, and you plan to start a small business with small seed capital.
2. Crowdfunding: Crowdfunding is a process of raising funds through multiple investors with the help of crowdfunding websites. This method of raising startup capital has gained a lot of popularity. Through crowdfunding, you can start your business along with promoting your product.
You can avail of the startup capital from the biggest names in venture capital investments. Under this method, you have to put a detailed description of your business on a crowdfunding website. Now, readers would assess your idea and provide financial support. People who contribute would make online pledges for pre-buying the product.
3. Angel Investment: Angel investors are people who would give a small business loan to your startup in exchange for an equity ownership interest. They help you nurture your business in its initial stages. Funds from an angel investor may be one-time investments or periodical investments.
4. Venture Capitalists: Venture capitalists are agencies that provide you with a small business loan for starting a business. If you do not have access to the equity market, you must go for venture capitalists and avail of their assistance. They are professionally managed funds that invest in companies with positive future potential. They offer expertise and mentorship to you for your company’s future.
5. Business Incubators & Accelerators: Business incubators and accelerators are also good funding options for new business owners. These are programs that help businesses in their early stages by providing shelter tools, training and network. You would have to commit to these programs for 4 to 8 months, in turn, to make connections in the industry, with mentors and with investors.
6. Contests: There are several online websites hosting contests and programs for young entrepreneurs to win. You can excel in your business field through this method. These winnings would maximize your opportunities for acquiring a business loan for your startup. If you happen to win such contests, you and your idea will get ample media coverage, which would help give a lift to your business.
7. Bank Loans: Banks are traditional ways of acquiring financial assistance. If you opt for a business loan from a bank, you have two options. Either you can avail of a working capital loan; or funding. The former is used to run a complete cycle of revenue-generating operations. On the other hand, funding involves producing a business plan and its valuation, after which a loan would be sanctioned.
8. Microfinance Providers or NBFCs: If you do not qualify for a bank loan, you can avail of help from microfinance providers to get the loan. This method does not restrict your business’s qualification. Also, Non-Banking Financial Corporations provide banking services without meeting legal requirements from a bank.
9. Government Programs: In India, the government launches startup funds that help new businesses to start and thrive. These government-backed programs are designed to boost companies with innovative ideas and plans to improve the country’s economy. It is just a question of getting qualified, and the government would grant you funding options to begin.
10. Product Pre-Launch: Pre-launching your product is another great way to gain market trust. It is a strategy used by many mainstream successes. Pre-launching your product would increase its demand in the market. You could also use the money earned to put into your business commencement. It creates cash flow and prepares you for future demand.
By employing the discussed points, you would face no difficulty availing of startup capital for your small business. Funding would give you the confidence required to step into the business world and achieve your dreams.
What are some famous companies which started with the help of Angel Investors?
Companies such as Uber, WhatsApp and Facebook were started by availing startup capital from angel investors.
What are some famous Crowdfunding websites in India?
Some famous Indian crowdfunding websites are:
What are the criteria on which venture capitalists choose businesses for funding?
Venture capitalists mainly choose companies for funding based on the following criteria:
- Industry, the company, belongs to
- Stage of the company’s business operations
- Location of the business
What are the common methods of bootstrapping?
Common bootstrapping methods are:
- Owner Financing
- Personal Debt
- Sweat Equity
- Operating Costs
- Inventory Minimization
- Subsidy Finance
What are some popular Indian business incubators?
Some of the most famous Indian business incubators are:
- CIIE IIM
- IAN Incubator
- CIE IIMC
- Kerala Startup Mission
- IIML Incubator
Is it possible for me to raise funds by cutting down my business’s initial costs?
Yes, it is possible to save money if you cut the initial costs of your business. You can do this in the following ways:
- Pay for your goods at the time of purchase rather than paying a lump sum.
- Use cost-effective materials for production.
- Stretch the use of your initial capital for a period longer than intended.
Which strategy did Apple use for raising seed capital?
Apple Inc. used the strategy of product pre-sale for raising a large part of its seed capital.
What are the steps in the process of raising Venture Capital?
Raising venture capital has the following steps:
- Researching Potential Investors
- Meeting with Individual Venture Capital Partner
- Meeting with a team of Venture Capital Partners
- Meeting with Full Venture Capital Company Board
- Offering Term Sheet
- Due Diligence
- Making Investment
How do I protect my startup idea?
For protecting your idea, you can file for patents, trademarks and copyrights. You need to file for a temporary patent if you have something propriety about your company.
What are the disadvantages of Crowdfunding?
Crowdfunding has the following disadvantages:
- It requires a lot of time and money.
- There are very few chances of your idea actually working.
- If you do not patent your idea, it might get stolen by someone.
- Crowdfunding is not suitable for businesses involving services such as catering, painting, etc.
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