Money is the bloodline of any business. Once you have realized the need for fund raising, below are some of the different sources of finance available -
Bootstrapping your startup business:
Self-funding, also known as bootstrapping, is an effective way of startup financing, specially when you are just 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 own savings or personal loans.
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 business. Moreover, in future, investors may consider this as a good point. But this is suitable only if the initial requirement is small. Some businesses need money right from the day-1 and for such businesses, bootstrapping may not be a good option.
Get Angel Investment In Your Startup:
Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. They can also offer mentoring or advice alongside capital.
Angel investors have helped to start up many prominent companies, including Google, Yahoo and Alibaba. They prefer to take more risks in investment for higher returns.
Venture capitalists (VCs)
Venture capitals are professionally managed funds who invest in companies that have huge potential. VCs provide expertise, mentorship and acts as a litmus test of where the organisation is going, evaluating the business from the sustainability and scalability point of view. VC firms invest in the early stages of your company in exchange for an equity share.
VCs have a short leash when it comes to company loyalty and often look to recover their investment within a three- to five-year time window. If you have a product that is taking longer than that to get to market, then venture-capital investors may not be very interested in you.
Raise Money Through Bank Loans:
Normally, banks is the first place that entrepreneurs go when thinking about funding.
The bank provides two kinds of financing for businesses. One is working capital loan, and other is funding. Working Capital loan is the loan required to run one complete cycle of revenue generating operations, and the limit is usually decided by stocks and debtors. While funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.
Raise Funds By Winning Contests:
An increase in the number of contests has tremendously helped to maximize the opportunities for fund raising. It encourages entrepreneurs with business ideas to set up their own businesses. In such competitions, you either have to build a product or prepare a business plan.
You need to make your project stand out in order to improve your success in these contests. You can either present your idea in person or pitch it through a business plan(as we have seen in Pitchers). It should be convincing enough to make anyone think that your idea is worth investing in.
Seek help from friends and family
These are the people who love you and trust you. Most importantly, they believe in you and your potential. Plus, unlike with a bank, you’ll likely be able to get some money from your friends and family without having to pay any interest.
Who knows, if you’re lucky, you might even get funds as a gift. In most situations, family and friends are flexible with the interest rate. This will be easy to raise due to less formalities/compliances, plus less costs of raising.