Are you looking for fund to start or run your business? Are you interested to know how you can fund your business? Here in this post, we have compiled 12 ways of financing your business which you can explore while initiating your business venture.
The most critical step in starting a business is the financing part. Securing finance has always been the toughest part for start-up entrepreneurs. Let us find out what are the genuine ways of financing small business ventures below.
12 Most Genuine Ways of Financing your Small Business
1) Bank Loans
Generally, availing bank loans come first when people starts thing of funding their business venture.
Banks normally provide two kinds of funding options to business owners. One is project funding and the other is working capital financing.
Where to Go
Nearly every bank in India provides business loans. You can check out SBI, Bank Of Baroda, HDFC, ICICI and Axis banks offer collateral-free business loans.
If you are looking for funding in the United States, check out sites like Kabbage, OnDeck for financing your business.
2) Crowdfunding
Crowdfunding is gaining a lot of popularity in modern days of financing business ventures. It is widely recognized as a form of crowdsourcing or alternative finance.
This kind of funding normally consists of three players. One is the project initiator who offers the business idea and proposal. Second is the individuals or groups who support the idea and third player works as the mediator or commonly called “platform” who brings the people concerned together.
Where to Go
If you are interested in crowdfunding your business venture in India, you can visit sites like bitgiving, Indiegogo, Wishberry, Ketto, Fundlined, Catapooolt, Milaap.
In United States, Kickstarter, RocketHub, Dreamfunded, Onevest and GoFundMe are popular crowdfunding platforms.
3) Angel Investment
Angel investors are normally rich people looking to invest in new business ventures. Angel investors invest in early stage or start-up companies. They invest in exchange for an ownership stake, normally in the form of preferred stock or convertible debt.
Where to Go
For Angel investors in India, you can visit the following places – Indian Angel Network, Mumbai Angels, Hyderabad Angels.
Also, check out the list of individual Angel Investors in India, some of these active angel investors have invested in many successful startups.
4) Venture Capital
Venture capital (VC) is a type of private equity form of financing. It is provided by firms or funds to small and early-stage companies which shows postive indicators in terms of growth.
Where to go
Some of the popular Venture Capitalists in India are – Nexus Venture Partners, Helion Ventures, Kalaari Capital, Accel Partners, Blume Ventures, Canaan, Sequoia Capital.
5) Business Incubators
Business owners at their initial stage can go for Incubator programs as a funding option. Business incubators not only helps in funding but also work as a mentor for a business.
Where to Go
In India, popular business incubators are Amity Innovation Incubator, AngelPrime, CIIE, IAN Business Incubator, Villgro, Startup Village, ICreate, TLabs, etc
6. Business Accelerators
Startup business accelerators support early-stage, growth-driven companies through education, mentorship, and financing. Normally this program continues for a fixed period of time.
Where to Go
For Business Accelerator programs check the following places Catalyzer, Freemont Partners, GSF Accelerator, Health Start.
7) Contests
Recently, there are many contests being organized for facilitating business funding. These contests are intended to invite and encourage individuals to set up their own businesses.
Where to Go
You can check out NASSCOM’s 10000 startups, Microsoft BizSparks, Conquest, NextBigIdea Contest, and Lets Ignite for their contest itinerary.
8) Microfinance Providers
If you don’t qualify for loans from banks, you can try microfinance providers to finance your project
9. NBFC
10) Govt Funding Programs
In India, you will find various Government loan schemes specified for small business both from state and central government to cater to the financial requirement of small businesses across the country.
Where to Go
Check out SIDBI, CGT-MSE, MUDRA, NSIC, NABARD, Startup India.
In the United States, there is a small business lending fund and a dedicated portal for Government grants available for funding local businesses.
11. Factoring/invoice advances
Factoring is a popular way of financing business. Normally, this is an expensive way of financing. When a company faces cash crunch or in need of immediate money, it applies factoring. Simply put it is selling your receivables at a discount for immediate cash payment.
Say, if you pay 3 % of the total order amount in order to get cash up-front 30 days in advance, it is actually equal to an interest rate of 36 % annually. However, in a situation of a cash crunch, factoring is not a bad option for financing your business.
12) Self Funding
It is always recommended to invest your own money when starting your business. Of course, it depends on your affordability. Financing from third parties become easier for a running company.
Where to Go
Ask your friends and relatives for investing your business. Check your own bank balance if it is enough to start the business. You can also consider selling assets or use credit cards to fund your business.
Finally, funding your own business needs to be carefully calculated. How much fund is required? How fast you want to grow? If the fund requirement is large or you want to grow your business fast, you have to fund your project from third party sources. Carefully find out on how much is your fund requirement and apply the best funding option mentioned above suits you most.