According to a recent report, start-ups in India attracted funding of around USD 10.14 billion in the year 2020. This data supports the fact that capital is highly necessary to convert a stellar business idea to a revenue-generating business. It is also seen that lack of funds turned out to be the most common reason for the failure of start-ups.
When it comes to securing funds for your business, in addition to opting for small business loans, there are several other effective ways. If you are an entrepreneur seeking funds for your start-up, going through the below-mentioned points would make you aware of the best ways to acquire funds.
- Securing venture capital for a business
Venture capitalists are a group that shows interest in taking partial ownership of a firm in exchange for capital. The valuation of the firm decides the percentage of ownership to investment.
Entrepreneurs who don’t have physical collateral as a lien to avail of startup business loans would find this an ideal option. In addition to generating capital, an entrepreneur develops a relationship with a venture capitalist during the process, which proves to be highly beneficial from the business point of view. In addition to industry connections, the relationship would help you gain abundant knowledge and tips to grow your business.
- Bootstrapping a start-up business
During the initial days of starting a business, bootstrapping or self-funding is one of the most effective ways to finance your growing business. First-time entrepreneurs need to show some traction and a potential plan for their business’ success to acquire funds.
Hence, they opt to invest from their savings or take contributions from others, like family or friends. This makes it easier to raise funds because of lesser compliances or formalities and low costs of borrowing. Self-funding or bootstrapping a business makes one get attached to the business, which forms a positive impression on future investors.
- Acquiring a business loan
Start-up enterprises and small business owners often consider opting for small business loans to purchase equipment, shore up cash flow and grow the firm. A business loan is usually cheaper than credit cards, and the business owners need not relinquish the ownership of the business to acquire the funds.
Nonetheless, these loans might sometimes require business-owners to have a certain vintage to avail them. Consequently, these funds are more suitable for individuals planning to expand their business.
Financial institutions like Bajaj Finserv provide pre-approved offers which help in simplifying and accelerating the lending process. These offers are provided on various financial products like business loans, personal loans, and more. Business owners can check their pre-approved offer by providing a few details such as name and contact number.
- Opting for angel investors to fund your start-up
Angel investors are investors who possess surplus funds and have an interest in making investments in young start-ups. Angel investors generally prefer to invest for higher returns to profit. That is why investments from them have higher risk involved than loans from any financial institution.
- Launching a crowdfunding campaign
Crowdfunding refers to the concept of collecting funds for major business operations from multiple investors through web-based platforms. Several web portals for crowdfunding are now available that enable businesses to bring in small investments from various investors rather than opting for a single source of investment.
- Choosing invoice financing
Through invoice financing, a business owner receives funds from a service provider for all outstanding accounts receivable. The owner, on receiving the funds, repays the lender after the latter settles the bill. This ensures that there is adequate cash flow in the business, which helps run the business even when the customers haven’t paid their outstanding invoices.
With the availability of numerous funding options, an entrepreneur often finds it difficult to choose the best option. The above guide lists the best ways to secure working capital for a business. Apart from opting for small business loans, these financing options can be helpful in meeting the funding requirements of any start-up.