12 Most Genuine Ways of Financing your Small Business

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 bitgivingIndiegogoWishberryKettoFundlinedCatapooolt, Milaap.

In United States, Kickstarter, RocketHub, DreamfundedOnevest 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 AngelsHyderabad 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 PartnersHelion Ventures, Kalaari CapitalAccel PartnersBlume VenturesCanaanSequoia 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 IncubatorAngelPrimeCIIE, IAN Business IncubatorVillgro, Startup Village, ICreateTLabs, 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 CatalyzerFreemont PartnersGSF AcceleratorHealth 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

Similarly, Check out MicroFinance Institute Network for more details.

9. NBFC

As per the RBI, “a Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property”.
Where to Go

 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  SIDBICGT-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.