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Nowadays, the most challenging part of any business is Funding! It takes money to turn a great idea into a great product.
Capital is a basic ingredient for any business to flourish. Without adequate finance, business startups tend to crumble. According to a recent study, one of the common reason why new businesses fail during the first year of operation is due to a shortage of Capital. Money is the bloodline of any business. Now, when would you require funding depends largely on the nature of the business. But once you have realized that you have to go for a fundraise you have to analyse and research which is the best suitable option for your business. Below mentioned are some of the different options available that will help you raise capital for your business.
1. Self- Financing/ Invest your owned Funds: It is also known as bootstrapping. When you are just starting your business and the initial requirement is small then investing your owned funds is an effective way of financing your business. It involves less fundraise formalities which can save a lot of time and cost. Moreover, you can expand your business without diluting any stake. You also can use your initial profits to bootstrap future growth instead of relying on future funding rounds.
2. Fund Raise: There are several alternative fundraise methods are available. You can meet investors according to your need and requirement. Here are some of the top fundraising options for startups:
a) Crowdfunding
b) Angel Investment
c) Investment from Venture Capital
d) Onboarding Incubators and Accelerators
3. Bank Loan: Small business loans are available from a large number of lenders. The large number of banks across the globe provides the loan to business as per their need and requirement. These types of loans can help your business to expand and to meet your working capital requirement.
The bank provides lends money according to the requirement of the business. Below mentioned are the options available to businesses:
a) Working Capital Loan
b) Small business line of credit
c) Term Loan
d) Account receivable financing
e) Equipment Loans
f) Business Loan
Whereas in order to procure the funds in the form of loan from any banking institutions first thing you must have in place is a well-structured business plan to convey the modus operandi, profit forecast and estimated time of maturity.
4. Government Grants: Government grants are an excellent way to source funding for any business. You are required to submit a plan or required details/documents (as required under each plan) that can be accepted by the approval committee and once your plan has been scrutinized and approved, you will be provided with the funds for your business.
The Indian government has introduced over 50+ startup schemes in the past few years. Each startup scheme is missioned towards boosting the Indian startup ecosystem. Not only in India but in other parts of the world like in the USA, there is a small business lending fund and a dedicated portal for Government grants available for local businesses.
In all cases, you need to apply for a grant in a proper manner as mentioned under the proposal document issued by the government for every grant.
5. Raising funds by winning competitions/Fundraising Contest: For a new Start-up fundraise is one of the most challenging part of the business. Participation in fundraises competitions not only helps you in fundraising but also provides you with a platform where you can showcase your business model to a large number of investors at a time. That means that even if you don’t win the prize money, investors in the audience that sees your vision and business model may be willing to help. Hence, participation in competition offers a lot of benefits and perks for you and your start-up.
Conclusion: The best funding options always depend upon the type of business and fundraise requirement. In order to expand your business, you need an outside source of capital. Whereas, it is highly preferable that you should always consult an experienced professional who can help you make an informed decision about what's right for you.
Article By: Ms Bhavya Sharma, a Practising Company Secretary from Delhi. In order to know more about the fundraising options or its process, you can connect with us. You can contact us at legal@bhavyasharmaandassociates.com or for more details you can visit: www.bhavyasharmaandassociates.com
Disclaimer: Although due care and diligence have been taken in the preparation and uploading this Article, Bhavya Sharma & Associate shall not be responsible for any loss or damage, resulting from any action taken on the basis of the contents of this Article. Anyone wishing to act on the basis of the material contained herein should do so after cross-checking with the circulars, notifications, applicable acts, press release issued by the concerned department or seek appropriate counsel for their situation.
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