Different sources to Raise Fund for your Business
According to a recent study, more than 90% of startup businesses fail during the first year of its operation. Lack of proper funding is the common reason for their failure. No business can function without money, as it is considered as it’s bloodline. The long journey from the idea to revenue generation needs a fuel named capital.
That’s the reason why in every stage of business, entrepreneurs are always puzzled with the thought of “How to finance their startup?”.
The requirement of funding depends upon the nature of your business you are running. Mention below are some different sources to raise fund your business.
Sources to Raise Funds:
Self-funding is also known as bootstrapping. And it is an excellent way of financing a startup business in the initial stages. The bidding entrepreneurs often find themselves in a situation where they have to show some potential for the business idea to get the proper funding. Now to can invest from your own savings or can get the same from any of your family members or friends.
This type of funding is comparatively easy to raise as there are fewer formalities involved and also the cost of raising the fund is low. Majority of the time the family and friends are flexible when it comes to the interest rate.
Crowdfunding is gaining popularity these days when it comes to funding a startup. We ca summarise crowdfunding as taking a loan or a pre-order, contribution or an investment taken from more than one person at the same time.
Crowdfunding works when an entrepreneur puts up the detail description about his/her business on a platform specially created for crowdfunding. On this platform, an entrepreneur will mention the goals, plans for making the profit and will also mention how much fund is needed and for what reasons and after that consumers can read about the business and if they like the idea they eventually invest in it.
3. Angel Investment:
The Angel investors are the individuals having the surplus cash at their disposal and who are eager to invest in some upcoming startups. They are likely to be seen as individuals but sometimes they also work in groups of networks to screen the proposals collectively before investing in it. They also offer their expertise and advice along with the capital.
There are some great examples where angel investors have invested in the companies such as Google, Alibaba and Yahoo. Angel investors invest in the companies in their early growth stage, where the investors are expecting an equity up to 30%.
4. Venture Capital:
Venture capitals are professionally managed funds who invest in the companies who have the potential to go big in the future. They mostly invest in the business for equity and exits as soon as there is an IPO issue or in case of an acquisition. Venture Capitals provide expertise, mentorship and acts as a litmus test of where the organization is going, evaluating the business from the sustainability and scalability point of view.
A venture capital is appropriate for small businesses which have moved past the startup phase and already generating revenues. They typically look for larger opportunities that are a little bit more stable, companies having a strong team of people and a good traction.
5. Business Incubators & Accelerators:
Businesses in their early stages can consider funding from Incubator and Accelerator programs. These programs helps hundreds of businesses every year and can be found in almost every major city.
Incubators are like a parent to a child, who nurture the business providing shelter tools and training and network to a business. Accelerators more or less does the same thing, but an incubator helps you, assists you and nurtures a business to walk, while accelerator helps to run and take a giant leap.
These programs normally run for 4-8 months and require a time commitment from the business owners.
6. Loans From Microfinance Providers or NBFCs:
What do you do when you can’t qualify for a bank loan? There is still an option. Microfinance is basically access to financial services to those who would not have access to conventional banking services. It is increasingly becoming popular for those whose requirements are limited and credit ratings not favoured by the bank.
- Posted on Jul 13, 2017
- By Dhruv Rudani
- 0 Comments