How to Get Funding for a Business Startup – Beginner’s Guide

Introduction:

Do you want to start your own business startup but not getting any ideas about How To Get Funding For Your Business Startup? Then this Beginner’s Guide can help you out to go smooth.

Your goal pyramid outlines the initial steps for a business startup when you have chosen a business model. 

But still, you lack one problem, that is Funding. We often lack the criteria for funding a startup as we don’t have enough capital. But Funding plays a significant role in starting and keeping the momentum going. 

It takes a lot of time and hard work to raise money and continue your business.

In this stage, most entrepreneurs and new businesses fail in their first year of operation. The common reason turns out to be Funding.

Many entrepreneurs find themselves in a situation where they ask this question, “How to Get Funding for a business?”.

Mostly there are prospective funding sources for different types of business. Nowadays, finding an investor is problematic as many companies are working in a technology-related field. 

This article will discuss the various sources of finances that will help you raise capital for your business. Here is the comprehensive Beginner’s Guide on How to Get Funding for a business in a detailed form below:

How to Get Funding for a Business Startup – Smart Method

Bootstrapping:

Bootstrapping is funding your own money initially for your startup. This kind of option is available for every entrepreneur. It is a tricky stage as investors are not likely to invest their money.

You can also take up a second job to fund your startup. As at this starting stage, it will require low funds. 

You can also get your family and friends to contribute. In this way, you can gather some money that comes in the purview of Bootstrapping. But it has its downsides of losing friends and having bad relationships, especially if you take their money as a loan. So you need to be careful if you are going this way.

It is also necessary to look out for other entrepreneurs who have sailed the same boat. It will help you analyze the incurring cost for your project and develop a winning model. Bootstrapping has one kind of advantages and disadvantages accordingly.

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As it solely depends upon you and your team who has dipped their savings which can either take them forward in the business or affect your growth.

Suppose your startup grows with bootstrapping. Then investors consider this stage as the right choice. Through bootstrapping, you can control your company without worrying about the finances as you can concentrate on your product’s growth and finance it through sales.

Crowdfunding:

Lately, crowdfunding is gaining popularity over its new fundraising form for entrepreneurs to get started in their startup business. It involves getting a large group of people to back your company with small contributions. 

For example, you are putting a detailed description of your business on a crowdfunding platform where you mention your goals, plans for making a profit, and how much seed fund you need to raise capital for your business.

In this way, those looking to invest in a business can access through the crowdfunding site if they like your business idea. Crowdfunding usually comes from a large number of successes which involves small donations.

It will help the funder receive his pledged money. It is a good option for business as it can generate interest and marketing about the business side by side while financing.

Crowdfunding is a competitive platform. 

So, unless you want your business to shine on. Your business has to be rock solid and gain the consumers’ attention, and press coverage is one factor for executing a successful campaign.

Some of the popular crowdfunding sites in the US are Kickstarter, Onevest, etc. In India, the sites are Ketto, Indiegogo, etc.

Angel Investors:

Angel Investors are single individuals who are keen to invest in upcoming startups with a lesser amount of funds. 

They also work in groups or networks. Mostly they want a stake alongside companies to earn profits just like how the companies do. They can even offer to advise or mentor alongside the entrepreneur.

Angel Investors are small development centers and websites that have helped many prominent companies in a startup. This form of investing is required in the early stages of your startup. 

Where you can offer the investor less than 50% stake in your company. Angel Investors invest lesser amounts than venture capitalists. So if you are looking for Angel Investors, then googling the right person and attending niche events are the best strategy to get them on board to fund your startup.

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Venture Capitalists:

Venture Capitalists are a group of people who invest in companies with huge potential or a startup that has been around for a couple of years.

Suppose your startup has been generating revenues. Then VC firms can invest in the early stages if you are ready to share your company for an equity share exchange so if you need a large cash infusion for your company. Then this kind of funding option can be a good option.

Venture Capitalists also provide their expertise in mentorship and participate in the company’s evaluation by modifying your plans and services.

Venture Capitalists exit the company when there is an IPO or an acquisition. They also provide resources for your company to sustain and scale in the market growth.

But consider the fact that venture capitalists also have its shortcomings. Such as they only structure a deal that is in their favor. They want to make their money as soon as possible as they don’t wait for their investment long-term.

So if you are the type of entrepreneur who wishes to stay independent and don’t want to compromise on your business operation, this is not an option.

Getting a Government Grant or Loan:

This option is often overlooked for funds by entry as banks offer convenient loans or full grants for entrepreneurs, which many people don’t know. Banks offer many options of loans for small businesses. 

They provide two kinds of financing for business, such as working capital loan and Funding. So if you are looking for funds in this option, it would be best if you were prepared with the business model with a plan and the report based on which loan is sanctioned as banks are not disposed to take risks.

In India, almost every bank offers SME finance through various programs, which are collateral-free business loans. New entrepreneurs have a difficult time getting a loan unless they are collateral. So check out the details in the banks that provide this option for Funding.

There is also an alternative option for funds by looking forward to money lending companies. But one has to be aware of their high-interest rate.

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Accelerators:

It is a quick way of funding your startup business if you focus on the tech niche. Accelerators provide short programs to charge your career growth and business. 

They focus on developing the founding teams or the entrepreneurs by mentoring themselves and present them with new opportunities in the business world.

Their program features a mix of mentorship and office space. So if you are looking for your Startup growth, this might be the best option to improve your startup business efficiency.

But the downside of accelerators is that they tend to be a bit competitive. They often focus on tech-savvy businesses. So you might struggle in finding the one for your startup.

Ways to raise money for your business:

So you might be thinking if the above options are the only ways to Get Funding for a business. But there are also few ways to raise money. However, these might not work for everyone. But still, you can check them out if you need quick funds.

Keep your day Job:

if you have a current job meeting your expenses and following your business dream. Then don’t quit the job as it allows you to build your dream startup business without being afraid of finances.

Credit Cards:

Credit cards are the quick way to get instant money for your startup. Where you can pay the minimal amount by using it if you are new to a startup business, but keep in mind that the cost of the cards and interest rates can spike up quickly. And being in debt can be pernicious to your business’s credit.

Conclusion:

While there are many different sources on How to Get Funding for a business, the big question arises from how you start from scratch with good governance later on. It will become hard to address the concerns. 

It mainly depends upon the entrepreneur’s growth and experience to take—the advantage of the market opportunities.

Bootstrapping can be available for some time at the early stages of the startup. But after that, you can choose from the various options of money lending which can get started for your business. 

Plus you should keep track of your expenses and have good accounting software for all the financial details to keep in order.

Hope you found this article helpful for you. If you still have any doubts regarding this article then don’t forget to drop your query in the comment section.

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