SOURCES OF STARTUP FINANCING

SOURCES OF STARTUP FINANCING

Raise capital for your business

Mostly business startups usually initiate with high hopes and investor confidence. The main necessity for any business to grow is good amount of capital. This is because capital is the first ingredient for any business to boom. Without sufficient funds business startups tend to dissolve and this problem often causes new-born business startup owners to seek financial support for their startups. After which a right market data or cost benefit analysis research for your startup is to be done. Here are a few advices on the procedure you can take on in order to source for the required funding for your startup.

1. Bootstrapping your business

To make your startup successful in one time, ensure that you have enough saved funds you can easily access or funds you can obtain from friends or family. The process to make use of personal saved funds or funding from friends and family is known as bootstrapping or self -funding. Obtaining funding from family and friends is a unique way to jump your startup. So, approaching the right friend or family who supports your idea is must to obtain the funds. 

Advantages- Funds can easily be accessed, little or no official problems, flexible interest rates.

Disadvantages- Bootstrapping doesn't work for MNC’s it only works for small-scale enterprises.

2. Crowd funding

In modern times, through technologies sharing the problems on an interactive social platform becomes easier. One of the crowd funding platforms set up for those individuals to angle their ideas or challenges to a community of investors. Procedure- Individual makes a business pitch on this platform, shares business model and it's would-be for growth. If his idea satisfied crowd funders on the platform, they will initiate to support his model publicly and donate funds.

Advantages- Crowd funding basically creates business public interest hence provides free marketing and funds for your business at the same time, it removes the workings involved in placing your business in the hands of an investor and uses that power to newcomer on this platform, has a potential to invite venture capital investment for business growth.

Disadvantages- Heavy competition in-built in these platforms can prove to be difficult if people with the same idea pitch as yours, if your business pitch is not as concrete as your competition, then there is a probability that your idea will be rejected.

3. Seek angel investment for your startup

Angel investors are people with a huge amount of capital and are eager to invest it on those who have solid business ideas. Angel investors sometimes inspect business proposals together in groups to select the perfect candidate to invest therein.

Advantages- It offers mentorship together with capital for startups, keen to take risks on business ideas as they foresee heavy return on investment from your startup.

Disadvantages- It provides lower capital to business ideas compared to venture capitalists. 

4. Seek Venture Capital for your Startup

Venture capitals funds are managed by experts that have a keen eye for looking out companies with great visions. Approach involves investing in a solid business rather than equity. Once there is an IPO or acquisition of the business they are partnered with, then they pull out and look other investments.

Advantages- Venture Capital effectively screen the company growth they have invested in hence ensuring the power and growth of their investment, mentorship and expertise venture capital bring to the table can also stand a business or company effectively, companies with solar growth rates such as Uber, Flipkart have a pre-designed exit plan that allows them to earn huge profits that they can invest again in the company growth in return.

Disadvantages- Venture capitals will remain loyal to your business till they have recovered their capital and profits, tend to lose control of your business since you are giving up a large part of it to venture capital investors, Venture capital investors search bigger companies with proven levels of stability and known workforce which will become problem because startups don't usually have this level of constancy.  

5. Raise Money through Bank Loan

Banking institutions provide financial support on loans to individuals who approach them with solid business ideas. The plan must be well-structured to convey the approach, profit evaluation and projected maturity time. The financial provision of banks is in two forms i.e., working capital loan and funding.

Working Capital Loan this loan is designed to pass through one full cycle of revenue generation. Debtors and stock usually have support on the limit.

Funding this involves providing the business ideas and brief valuation information together with the project report on which the loan was approved.

Advantages- Large capital can be call up by entrepreneurs, provided capital can fastrack the process of revenue generation.

Disadvantages- High risk of collateral loss, since it is an important need for loan sanction.

6. Acquire loans from microfinance providers or NBFCs

Microfinance was set up to provide capital to small scale business that has limited predictable banking capital or loans. Individuals with lowly credit ratings seek institutions as a relief whenever they are ignored by conservative banks. NBFC’s provide loans to individuals who ask loans without necessarily imposing any right like conventional banks and credit repair reports do.

7. Other Ways you can Raise Money for your Startup

Product pre-sale: Remarkable way of raising funds for your startup is through selling product in advance before product launch officially. This increase consumer confidence in your brand and allows you to increase the product demand before its official launch. Companies like Apple and Samsung adopt this procedure, inviting consumers to purchase in advance before the official product release.

Selling assets: Selling assets that have high financial value, can efficiently serve as an instant source of funding for your startup.

Credit cards: Business credit cards are an instant source of funding. New businesses that suffer heavy expenditure can use credit cards as long as they fulfil the minimum payment requirement.

CONCLUSION

Based on the above source of funds, employing the strategies here can greatly increase the chance of survival of your startup. Bootstrapping among other funding sources outlined in this guide is the best way to kick off your business operation. However, staying competitive in the market interchanging your funding sources is must. This provides you with some level of elasticity and over dependence on one source of funding.

For more information contact us on given communication details, Email Id Swati@neusourcestartup.com and Phone Number 9540026175.

The NeuSource Startup Mind is the finest business startup consultant that offer various services of registration like Proprietorship Firm Registration, Partnership Firm Registration, LLP Registration, Company registration, GST Registration, Copyright Registration, ISO Registration Trademark registration and other FSSAI License etc.

07 May

Ayushi Agrawal
CS Ayushi Agrawal

All in Startup: Launching a New Idea When Everything is on the line!! But doing something that isn’t done before takes the world from zero to one. NEUSOURCE takes an progressive approach to building startups. THINK OUTSIDE THE INBOX!!