15 best ways to get initial funds for your startup
Wednesday May 29, 2019,
7 min Read
It is sure your dream to intiate your startup. And at the same time you must be waiting for all the resources to be present in abundance. Along with this, the it is one of the biggest decisions to fund your startup as not everyone has the money required to do this. Though, there are multiple ways to get this done. We, today will discuss top 15 ways to fund your startup.
Crowdfunding is done to raise money from the crowd (general public). Here, platforms like social media & other crowdfunding platforms are used for this purpose. The funding from this source could be in the from of equity, debt or donation based. In this case, the complete description of business is put on crowdfunding platform. In addition to this, the goals of business, plans of profit etc. Is provided to make the business stand out from the other businesses. The competition of investing is quite high so try to best your business plan. This is one of the best ways to fund your startup as it cuts out the professional investors & brokers by putting funds in the hands of the common people.
In this, the entrepreneur funds his/her business by using the savings. This is definitely one of the best ways to fund your startup. There are no legal formalities and paperwork required and so it is very attractive for first time business owners. As you will see in the upcoming other options, it is very difficult to raise funds for startup. So, when you invest your own money in your business it is tied up and you give your best. Every business require money from day “1” & bootstrapping may be a good option.
Family & Friend
When it comes to investing funds when you don’t have the required funds, one of the best ways through family & friends. These are the lifelong connection with us and have tremendous confidence with us. You can ask for a loan with low rate of interest or zero rate of interest. In this case, you’ll be getting a loan that is supportive in nature unlike other cases where the investors are at your throats all the time. Although, you should tread cautiously as well as one of the best businesses start between friends but at the same time one of the major disasters in businesses.
Angel investors make huge investment in startup businesses. The funds in this case are invested in exchange for equity ownership of the business. All you need to do is to find the right investor, prepare pitch deck, negotiate investment terms & more. The ownership could be between 10-50% of the total equity. One of the best angel investment organizations in India are as follows:
- Venture Catalysts
- Mumbai Angels
- Indian Angel Network
- Chennai Angels
- Lead Angels Networks
- Calcutta Angels
- Hyderabad Angels, etc.
These funds are invested by venture capitalists who selects the companies for investment based on growth & returns. This type of investment is over when the business enters the IPO stage. These venture capitalists project & provide expert guidelines for the growth of startup. This type of investment is suited for businesses that’re beyond start-up phase & are generating businesses. In addition to this, the company should have a strong team & good traction to gain good investment. This should be kept in mind that they’re not interested in businesses that’re taking a long time to get to the market.
Loan from NBFCs
After a series of funding, a startup can opt for NBFC loans. Like every, loan you need to repay loan along with interest in the given time frame. The startup along with this, could opt for microfinance institute can give loans as well. Requirements are limited to get loans from NBFCs and the interest is low. These financial services to those who don’t have the access to conventional banking services.
The government of India, along with the some states of India have launched many government schemes to help the businesses. These schemes could be Bank of Ideas & Innovations’s Program, MUDRA Loan (Micro Units Development and Refinance Agency Bank) are some of these schemes. Under MUDRA scheme Rs. 20,000 crores funds have been lent to more than 10 lakh SMEs (Small & Medium Enterprises). The scheme has 3 options Shishu, Kishor & Tarun to choose from. There are more state-wsie schemes launched such as Kerala State Self- Entrepreneur Development Mission, Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc. Along with this, SIDBI (Small Industrial Development Bank of India) offers loan to MSME sector.
There are 2 types of bank loans to help your startup. Capital loans and Funds.
Capitals loans are the loans required to run one complete cycle of revenue generating operations as is decided by the bank and the business owner.
Whereas in the case of funds, you have to share your B-plan & valuation details, along with project reports, etc.
The Banks providing these type of loans are
- Bank of Baroda
There are competitions among many business startups to get the funding from the investors. There is also some media coverage to make which advertise this event and creates awareness among people. For this prepare business plan or build a product and make your project stand out. You can present your idea in person or pitch it through a business plan. We give you a tip to make your plan comprehensive enough to make it worth investing.
Incubators & Accelerators
The incubators and acceletors fund the startup but in different cases.
In the case of incubators, it is like a parent to a child providing shelter tools & training and network to a business.
And the accelerators, it is to run a business and take a giant leap in the business. So, the amount invested is higher than in the case of incubators.
These are general investors who invest in exchange for shares. These investors want you to invest in wise ways and make wise decisions. This could be in marketing to expand business and creating awareness among people. The main emphasis will be on growth of the business.
Private Equity Firm
This is an investment management company that raises pool of capital or private equity funds that supply the investments. This firm bring operating partners with expertise in the startup’s industry. It will increase startup’s opportunity to create next-generation product’s and services.
In this case of investment anyone can become an investors to your company. For this type of investment, Investor bankers are required to do paperwork & sell equity stock on behalf of the customer. To raise funds through this your startup should have proper & stable financial statements, growth-oriented team & good corporate governance should be developed as well. So, this is a type of investment for a business that has a solid foundation and have capable top level management.
To get funding through this, you should own an office as the credit card lends loan to registered office. Most companies give 50-52 days to clear the purchases made on the card. So, if your businesses can make the payments on time then only consider this type of investment. But, if your company can only repay the amount within months or years then you shouldn’t consider this type of investment.
A business can get a loan through this for up to a period of 10 years from the date of incorporation & registration. The incorporation could be a private limited company, registered partnership firm or a LLP (Limited Liability Partnership). Register your LLP now. The firm should be working towards development, improvement of products/processes/services.
This blog is written by Anubhav, who holds the position of Content Writer at Legalraasta.
LegalRaasta is an online platform that provides tons of legal services like Income Tax
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