Every start-up relies on a good idea and a great team. But you cannot undermine the role of capital in the success of the start-up. Without funding, there is a very good chance that the start-up will fail in the long run. A recent study shows that almost 94% of start-ups fail within the first year. And most of these shut down due to a lack of capital.
So, if you already have a start-up or are about to start one, you need to ensure you get funding at the right time. Consider the following funding options for small businesses to give your company the boost it needs.
You can fund your business by raising money through loans or line of credit.
Banks offer a working capital loan which is a loan required to run one cycle of revenue-generating operations. The other financing option is funding, where you have to share the business plan and valuation details.
If you don’t get bank funding, you can apply for a self-employed personal loan or personal loan for businessman on platforms like MoneyTap. This app-based line of credit lets you borrow money safely and flexibly.
Angel investors are wealthy, high-net-worth individuals who invest their personal money to fund start-ups in exchange for equity.
They usually focus on early-stage or small start-ups and put in lesser capital as compared to bigger investment companies.
Before you approach them, make a comprehensive business plan to improve your chances of getting funded.
It isn’t always possible to get funding or loans in the early stages since you probably cannot show the potential of the business and/or scope of growth. If you are at that stage, you can bootstrap which essentially means putting in your own money.
You can invest your savings or get your family and friends to contribute. This is a great option if the initial capital requirement is small. But if your start-up is capital-intensive from the get-go, consider other options on this list.
A start-up incubator is a company that helps new start-ups grow – right from developing a clear business idea to providing management training. Some incubators also offer office space and networking opportunities which will help the businesses.
The incubation programs run for around 8-12 months where you can connect with investors who can fund your business.
With crowdfunding, you can reach out to a pool of potential investors who are interested in investing in promising start-ups.
You have to put up a detailed description of your business, what it does, your business goals and plans, how much funding you need, and how you plan to use those funds. If someone likes what you present, they will contribute to the funding.
Some people offer the money as a loan that you have to pay back, otherspre-buy the product in exchange of funds, and some just donate money with no expectations of getting repaid.
There are government schemes that provide funding to MSMEs. These schemes provide loans by commercial banks, NBFCs, corporative banks, MFIs, or RRBs.
Options like bootstrapping will allow you to grow organically but the progress will be slow. If your goal is to grow fast and take advantage of market opportunities in real-time, you will have to rely on external sources of capital. There is a lot of competition for funding, whether to secure a personal loan for self-employed or seed capital. So, make a compelling case for your business to attract anyone who is interested in investing.
Shiv Nanda is a financial analyst who currently lives in Bangalore (refusing to acknowledge the name change) and works with MoneyTap, India’s first app-based credit-line. Shiv is a true finance geek, and his friends love that. They always rely on him for advice on their investment choices, budgeting skills, personal financial matters, and when they want to get a loan. He has made it his life’s mission to help and educate people on various financial topics, so email him your questions at [email protected].