When you are starting a business, there would be many challenges. The most important among them is finding a source to fund your business.
Once you make a decision on your business idea, the next step is executing it. The core requirement for execution is money. It involves buying furniture, acquiring a business space, hiring staff and much more.
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10 Ways To Raise Funds for Your Business
In this article, we mention a few methods to fund your business.
- Crowd Funding: The term crowd funding means, small amounts are raised from a group of people who are interested in a particular venture. This is an efficient way to raise funds. All you must do is find a group of people who believe in your business idea or goal. There are many platforms in India that offer crowd funding. You can easily get into one of them and start the fundraising by specifying the purpose.
- Bootstrapping: It is the process of using existing resources to fund a business. This includes savings, home space, renting personal equipments and so on. This gives the owner complete control over the new venture. Although it can limit the growth of a business due to restricted funding, it relieves the founder from external pressure.
- Angel Investors: These are investors who are interested in funding startup firms. In exchange, they buy convertible debt or equity shares of the company. The name is interestingly in accordance to their activities. Initial stages of a startup are the most risky. Angel investors offer financial backup during this crucial phase of the business. One important thing is, these are investors who believe in the potential of a firm and look forward to earn profits in the future.
- Venture Capitalists: They are similar to angel investors. They have surplus cash which they like to invest in potential startups in exchange for shares. However, unlike angel investors, venture capitalists look forward to obtaining certain rights. They function as knowledge centers to companies.
- Friends and Family: Nobody is going to celebrate your success more than your family and friends. So, borrowing money from your close ones to fund your business is a great option. However, before taking this step, make sure you review the pros and cons. Loans taken from banks or financial institutions involve high rate of interest. Loans availed from family are free of cost.
- Find a Partner: If you are able to find a partner who is interested in your business, then you can start a partnership firm. This means there is one more person to invest and share the success/failure of a firm. This works the best, when people with common interests join hands. It is always important to go for a trusted person as your partner.
- Advance From a Customer: Sometimes; you are caught with a very innovative idea but lack an effective source of funding. In this case, try to convince a potential customer about your business and negotiate an advance for the implementation of the same. This will work if you succeed in impressing the customer.
- Business Loan: This is a traditional method of funding a start up. You can take a business loan from banks or financial institutions to fund the startup. Today, banks and the government offer customized loans to entrepreneurs and small scale start up firms.
- Microloans: To get a bank loan, the borrower must undergo a number of processes. This includes, background check, purpose of loan, CIBIL score and so on. Only if he/she meets all the criteria, loans would be sanctioned. If a person is unable to meet these criteria, he can go for microloans offered by microfinance companies. These companies offer small loans to the unbanked population of the country, at lower interest. Most of these loans do not require collateral.
- Government Schemes: Besides banks and microfinance companies, government also offers a number of programs to fund the business. You can go for these loans, which are government backed and hence safer. There are a number of schemes available, each pertaining to various sectors and requirements. You can choose a scheme which best fits the purpose.
See Also: Types Of Investment Plans
Before deciding on a funding plan, make sure you discuss the matter with experts in your circle. It is always good to take advice from people who have gone through the same phases. Doing a little investigation helps decide which is the best funding option.
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