8 Effective Ways to Raise Funds for Your Startup Business

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How to raise fund for your business

How to get started Business success is defined as taking the first step to bring an idea to life. The world is populated with dreams and goals, but only some live to see the end of the light, and the rest fade away due to a lack of funds or resources. Most of those dreamers who kept afloat their idea, turned to other methods in the hope to find guidance.

A great idea can be a business when presented with the right path and guidance. Launching a new business requires capital that will define the base of the business and strong capital will open doors for further growth and expansion. The crunch of any business is elucidated by the initial momentum gained in the market for which it’s essential to understand basic financing techniques. Here are the lists of funding options for small businesses and startups

1. Uncover your angel to invest

A brilliant idea can allure affluent individuals who are willing to invest in the potential idea that can be groomed into a profitable business. These investors are known as Angel Investors who not only provide monetary assistance but also their business expertise to validate the business into success since it’s their money on the line.

However, unlike the typical loans provided by financial institutions, these angel investors do not obligate the entrepreneurs to repay the invested money within the stipulated period. Instead, they invest with the expectation to earn higher returns and equity shares. These Angels focus on establishments that are beyond the start-up phase that has proved scope for success but require capital.

The debate question of where to find these investors is easily answered by many of the online angel listing platforms, LinkedIn, and other angel investment forums. It is important to note that these investors will invest in your idea rather than yourself therefore your business idea needs to show a visible probability of success

2. Find your crowd to fund

When one or two investors aren’t enough to get your business off the ground, maybe you need more, and in that case, you can turn to a crowd. By developing a successful campaign strategy, this crowd can provide capital through rewards, donations, or equity to your business.

Crowdfunding is a platform for budding entrepreneurs to pitch their vision and acquire multiple investors via social networking and web-based business platforms. Since the vision is presented to all, it is easier to gain a pool of investors.

There are an ample number of crowdfunding websites that help to kickstart your business such as Kickstarter, Gofundme, and Indiegogo. Although these sites are easily accessible to the public, it is wise to read the rules of these sites since they have specific rules. 

3. Equipment or Machinery Loans 

Machinery focussed businesses are fund-intensive and machinery loans will assist in raising funds for business. As part of small business funding, banks provide small businesses with capital to purchase expensive equipment by taking collateral and additional security over a period of 4 to 5 years at a lower interest rate, one way to raise funds.

These loans can be acquired at the highest rates based on the applicant’s business profile, profitability, and necessity. In addition, regulations specify that businesses can benefit from tax benefits for machinery loans in India.

4. Loans under Government Schemes and NBFCs or MFIs 

Apart from Angel Investors or Crowdfunders, we have our Government with various loan schemes that aim to benefit start-up business which includes the MUDRA loan scheme under Pradhan Mantri Mudra Yojana, Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises, etc. 

Getting loans from private or public sector banks will be difficult if you are unfamiliar with loans or have no credit score. You can apply for start-up loans from Non-Banking Financial Companies and Micro Finance Institutions once your credit card score is intact.

5. Finance it yourself 

One of the oldest fundraising methods used by several businesses, self-financing is one of the best ways to launch a business. Upon the visible growth of the business, business loans are accessible, provided the business meets the loan eligibility criteria.

6. Family and friends investment

This refers to the practice of raising funds from close personal contacts, such as family members, friends, and acquaintances. This can be a low-risk option for early-stage startups, as the investment is often made with little or no expectation of a financial return.

However, it’s important to remember that taking money from family and friends can have consequences for personal relationships, so it’s important to approach this option with caution and transparency. This type of capital may also be limited in terms of the amount raised and may not be sufficient to support the long-term growth and success of the startup.

7. Opt for Venture Capital or Business Loan 

Venture Capitalists are a firm of individuals who invest in business at their initial phase for an exchange of equity interest. VCs also provide mentoring to expand and grow the business Business owners can avail of business loans to tackle expensive expenditures in terms of expansion, upgrade of machinery, and hiring manpower. In order to succeed, it is important to know the top venture capitalists among other people.

8. Accelerating Startups with Incubators

An incubator is a program or organization that provides support, resources, and mentorship to early-stage startups. It  offers a range of services such as office space, access to networking opportunities, mentorship, and training programs. 

The goal of incubators is to help startups get off the ground, grow, and eventually become successful companies. They may also provide seed funding to startups, although this is not always the case. By participating in an incubator program, startups have the opportunity to learn from experienced entrepreneurs, build their networks, and receive valuable resources and support.

Conclusion

Ultimately, all you need is the perfect business plan that promises profit to raise capital. Business growth is inevitable, but it also requires funds to expand and enter new markets. Businesses need to acquire knowledge about fundraising as a lack of capital leads to the loss of a potential idea. However, by applying the various fund raising methods for business listed above, an idea can be groomed into a successful business.