It costs money to start a business. Funding your business is one of the first — and most important — financial choices most business owners make. How you choose to support your business could affect how you structure and run your business.
Here is a comprehensive guide that lists ten funding options for startups that will help you raise capital for your business. Some of these funding options are for Indian companies; however, similar alternatives are available in different countries.
Here are some pointers on how to find finance for business
These points help for how to find finance for business
Bootstrapping your startup business:
Self-funding, also known as bootstrapping, is an effective way of startup financing, especially when starting your business. First-time entrepreneurs often have trouble getting funding without first showing some traction and a plan for potential success. You can invest from your savings or can get your family and friends to contribute. This will be easy to raise due to fewer formalities/compliances, plus fewer costs of raising. In most situations, family and friends are flexible with the interest rate.
Self-funding or bootstrapping should be considered as a first funding option because of its advantages. When you have your own money, you are tied to the business. At a later stage, investors consider this as a good point. But this is suitable only if the initial requirement is small. Some enterprises need money right from the day-1 and bootstrapping may not be a good option for such businesses.
Get venture capital from investors
Investors can give you funding to start your business in the form of venture capital investments. Venture capital is generally offered in exchange for an ownership share and active role in the company.
Venture capital differs from traditional financing in several fundamental ways. Venture capital typically:
- Focuses high-growth companies
- Invests capital in return for equity, rather than debt (it’s not a loan)
- Takes higher risks in exchange for potentially higher returns
- Has a longer investment horizon than traditional financing
- Almost all venture capitalists will, at a minimum, want a seat on the board of directors. So be prepared to give up some portion of both control and ownership of your company in exchange for funding.
Small Business Grants
The Small Business Administration and other organizations sometimes offer grants to small businesses that women, minorities, or veterans run. If you fit into one of these categories, it’s worth speaking to your local SBA chapter, or Chamber of Commerce, to see if there’s local grant money that you may be able to apply for.
Let’s face it; unless you have an incredible idea and a strong business history, you’re probably not going to make it onto Shark Tank. Many local COCs and SBAs have decided, however, to run regional Shark Tank-style competitions. Since these are more locally-focused, often requiring that a business operates in a particular area to enter, they may be less competitive.
They are also a great way to practice your pitch for other investors. Generally, you won’t lose anything but time for trying. And even if you’re not the number one choice, you may spread awareness of your business.
Venture capitalists (VCs)
You can also secure funds from venture capitalists.
VC firms invest in the early stages of your company in exchange for an equity share.
If you decide to take this route, be prepared to give away a portion of your business.
That’s not always a bad thing.
If VCs have some skin in the game, they may be able to provide you with other resources that can contribute to the company’s success.
But understand that smart VCs will only structure these deals if they are in their favour.
They don’t want to make a return on their investment in 30 years.
VCs want to make their money back, plus some, as soon as possible.
The likelihood of you receiving VC funding largely depends on your industry.
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