Starting a business? You have a great idea, you have the will and you know you will. Ever thought of the capital or funding required fulfilling your dream? Launching any business requires capital investment, whether the start-up is any type of MSME or large enterprise. Funding makes your business to initiate with a strong base and helps to expand and grow further. Finding funds for a start-up business can be sometimes challenging and tiresome task. However, to make it simple for you, we have compiled a few important financing techniques that shall help you in finding finance.
Self-Financing your Start-up
Self-financing or personal investment is the best way of financing used by several business start-ups. Even when you take loan or ask a venture capitalist or government entity to provide funding for your start-up, they still have this question; how much capital you shall be investing in your start-up? Investing your own savings is the best option for the first time entrepreneurs. In the later stages of business, you can easily opt for business loans and lender shall not have a reason to deny it, as they will consider the stability of business, as it will be low risk factor for them.
Getting an Angel Investor
Individuals with surplus cash are known to be Angel investors and these individuals are interested in investing in new start-ups in India, as well as worldwide. The risk involved in these investments by Angel investors is more, as compared to loans offered by financial institutions, as Angel investors plan to invest for higher returns to profit. India’s popular Angel investors include Mumbai Angels, Indian Angel Network and Hyderabad Angels. Start-up owners can directly get in touch with these investors for funding support.
Crowdfunding is a concept of collecting funds from multiple investors via social networking sites and web-based platform for majorly business purposes. Online Crowdfunding web portals raise funds for various other purposes like social causes, charities, ideas, disaster relief, events, etc. This concept or idea helps in raising funds for start-ups or first time business owners and also promotes social and cultural causes. India’s leading Crowdfunding platforms includes Kickstarter, Ketto, Catapooolt, FuelADream, Fundable, Indiegogo, Milaap, Wishberry, etc.
Loans under Government Schemes
Government of India has launched various loan schemes that aims to benefits Start-up enterprises, SMEs, MSMEs, as well as promotes the socio-economic growth of rural India, women entrepreneurs, educated youth, individuals from SC/ST category, Small Scale Industries (SSIs), villages, people living in rural and urban areas, etc. Loan schemes initiated by Government of India to help Start-up enterprise include MUDRA loan scheme under Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Stand-up India, Atal Innovation Mission, Make in India, Trade related entrepreneurship Assistance and Development (TREAD), etc.
Loans from banks
Banks are considered to be the first priority for start-up enterprises, as they find it more reliable and convenient way of taking money. Banks provide funding to start-up enterprise in two forms named as term loan and working capital loan. Almost every public and private sector bank of India offers business loans for start-ups. However, the interest rate, loan amount and repayment tenure offered shall vary from bank to bank.
Small business loans from NBFCs, MFIs
If you are new to lending and does not have a financial history or maintain any credit score, then it shall become difficult to get loans from private or public sector banks. By contacting Non-banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) you shall get business loans for your Start-up based on your requirements without having credit score or financial history. The interest rates offered by NBFCS and MFIs are comparatively higher, as compared to PSU banks.
Also Read: How to Start a Business in India?
Business credit cards
Credit cards for business purposes have taken a rise since the emergence of start-up enterprise in recent years. If your start-up does not require large amounts of money at initial stages of business, then you can use credit cards for transactions and timely repaying the amount to avoid debt or extra interest rate charged in form of penalty.
Peer-to-peer lending is a type of money borrowing where no intermediaries are involved in the whole process. Lenders lend money to borrowers as their investment and borrowers get money at their disposal to invest in their Start-up. In this process, lenders can earn from borrowers, as the interest rate offered is higher, as compared to banks, NBFCS and MFIs. Peer-to-peer lending institutions are regulated by RBI for the betterment of both lenders and borrowers. For start-up enterprise, peer-to-peer lending is a type of loan, whereas for the lender it becomes an investment.
So there you have it all, popular financial techniques of funding your Start-up business. Out of all the mentioned techniques, at least one shall be definitely helpful in getting funding for your start-up enterprise. Get ready with all the bootstrapping processes and launch your start-up while choosing best from the available options.
Best of luck!!