How To Raise Funds For Your Business?

. 5 min read
How To Raise Funds For Your Business?

How To Raise Funds For Business In India?

  • Raising funds for small businesses or start-ups is difficult, and it takes a lot of effort and patience.
  • There are different ways from which you can get funds to grow your business, but you should know which type of funds will suit your business in a better way.
  • Having information about getting funds from different methods will certainly help you, as you can identify which type of fund will be the most convenient and beneficial for your firm.
  • In this article, you will get to know about multiple ways of raising funds for your small business or start-up in detail.
  • Read without skipping anything to get a better idea about the game of fund-raising.

These are some of the ways to raise funds effectively for your business:

Crowdfunding

  1. Crowdfunding is currently one of the newest and popular types of funding.
  2. In crowdfunding, many people can raise funds for particular businesses or start-ups through crowdfunding websites.
  3. There are now multiple crowdfunding websites from which you can get numbers of investors looking to invest their money and profit from businesses with new ideas and talent.
  4. On crowdfunding platforms, you can give a detailed description of your business and the idea of your new startup plan.
  5. If the investors and entrepreneurs on the crowdfunding website will like your business idea, they will invest their money.
  6. In this way, you can generate a massive amount from different individuals and entrepreneurs.
  7. However, there are certain regulations for some investors and funders, which limit the amount of money they want to invest because of the risk of new startups getting failed is involved with it.
  8. Many successful startups and businesses have raised millions of funds through crowdfunding and made their idea popular globally.

Angel Investors

  • Angel investors are wealthy individuals who help the startups in their initial stage.
  • Generally, these investors invest their money in the new businesses in exchange for ownership equity in the company.
  • In the early stage, when the founders struggle to get enough funds for their start-up, angel investors are the ones who help them out with huge investments.
  • The angel investor usually invests their capital in the non-established businesses to get comparatively higher returns than other types of investing.
  • You can get these private investors from your family or friends who are looking to invest their money.
  • Getting funds from the one who knows you make the whole process smooth, and both parties can share a great amount of trust.
  • The other types of investors are individuals and groups from various professions and backgrounds who invest their funds in new businesses to get ownership and equity in the company.
  • You can also get potential angel investors from new crowdfunding platforms.
businessman signing the loan agreement

Bank Loan

  1. A bank loan for small businesses and start-ups is the most common way to raise funds.
  2. But to get your bank loan request approved, you should consider many things before applying for it.
  3. As there is risk involved to provide capital to a new business, the bank goes through certain verifications just like any other loan process.
  4. It is essential to know which factors are responsible for getting a bank loan approved or rejected for your business.
  5. To get a bank loan, you must have a business plan with objectives and short-term and long-term goals.
  6. Banks will decide whether to provide you with a loan or not mostly based on your business plan.
  7. You may have to provide details to the bank regarding the amount you require and its usage for your business.
  8. For instance, if you want to buy a certain asset or any other expenses.
  9. Having a good credit score will undoubtedly help you to get your loan approved.
  10. There are many websites from which You can check your credit score online for free.
  11. A credit score that is 700 and above is considered a good score and increases the possibility to get a bank loan.

Venture Capital Funds

  • Venture capital is a well-known investment process that involves private investors, banks, and other financial institutions.
  • The venture capital funds are managed professionally, and hence it is a great option for businesses struggling to get funds from the bank and other individual investors.
  • The venture capital investments mostly provide the business model with great potential or for a business to perform well in the initial stage.
  • It is a type of equity finance that helps the new startups with the long term potential in their early stage.
  • This type of investment is mostly high risk and high-profit return based.
  • The return for this type of investment varies based upon the field and industry of a particular business.

Bootstrapping

  1. Bootstrapping is self-funding your start-up or business from your savings and resources.
  2. Bootstrapping should be considered the first option for funding our businesses as it requires less effort and time to get funding than other options.
  3. You can either use your savings to fund your startup or ask your family member or friend to lend you money.
  4. Bootstrapping comes with some benefits and downsides.
  5. On the bright side, you will be the only decision-maker with no other investors' interference.
  6. In this type of funding, it's difficult to raise a big amount of money, and it comes with a high risk of the business not performing well initially.
  7. There are many successful companies today which started their firm with personal finance and funds.
  8. If you have sufficient savings and resources with you and funding some amount for your business from it will not affect your financial situation, bootstrapping should be your first option before going for venture capital investment or crowdfunding.

Loan From Non-Banking Financial Corporations

  • Non-banking financial corporations or NBFCs are becoming a popular way of funding your business if the bank rejects your loan request for several reasons.
  • The loan disbursal or approval is easy and quick in non-banking financial corporations compared to the banks.
  • To get funds through NBFCs, you do not need to go through lengthy paperwork and documentation.
  • As it mostly provides unsecured loans, NBFC's will not require any collateral for the loan.
  • NBFCs also provide businesses with a pre-approved loan with a flexible EMI option.
  • Having a pre-approved loan support business in the times when entrepreneurs require quick funds in difficult situations.
  • These types of loans are more convenient for small businesses, and that's why many entrepreneurs prefer NBFC's loan instead of bank loans.

Funds From Govt Programs

  1. In 2015, Indian prime minister Narendra Modi announced the PRADHAN MANTRI MUDRA YOJANA (PMMY) which provides funds for startups and MSME at low-interest rates.
  2. In this program, the small finance banks, NBFCs, commercial banks, etc.
  3. Provide loans to small and medium businesses.
  4. There are three categories of loans that are Sishu, Kishor, and Tarun.
  5. Entrepreneurs can apply for these funds on govt portal with their business plans and required amount.
  6. Different states and countries have their own programs to help new startups and small businesses as funding businesses eventually strengthen the nation’s economy.
line increasing with the help of stack of coins

In Conclusion

  • To summarise, there are different options for funding your business in this digital and developed world.
  • With all the different funding methods, you can choose the best option that suits your business type or industry.
  • From bootstrapping to venture capital to bank loans, today's entrepreneur has many opportunities and options to convert their idea into a hugely profitable company.
  • To achieve your goals in your respective startups and businesses and live your dream life of a successful entrepreneur, try getting funds from different ways mentioned above.

Also Read:

1) How Small Businesses Afford Digital Marketing?
2) Does Commercial Solar Power Make Sense For Businesses?
3) 7 Different Types of Loans for Your Small Business
4) Hiring and Managing People Wisely: HR Mantras For Small Businesses