It is a general tendency for startup businesses to fail within the very first year of their operation. The main reason behind this is the lack of proper funding. Corporations need to raise their business finance or startup capital to invest in new projects and enhance their businesses in new spots or locations to sustain in the market.
Most companies try to obtain all of the capital they require for growth by simply using their profits from ongoing business operations like selling goods and providing services.
However, at a certain point in time, any company needs to raise funds in some way or the other to make more money, develop their products, and also expand their market growth.
Some of the approaches or avenues to consider for raising business finance are listed below:
1. Bootstrapping the startup businesses
Bootstrapping, also known as self-funding, is one of the most effective ways of financing startup businesses. First-time business entrepreneurs often encounter the difficulty of getting funded without charting out plans for potential success.
This kind of startup investing is based on personal savings or by contributions made by family members and friends. Such funds are easy to raise as they require fewer formalities or compliance.
Investors for startups consider this a highly effective option for stretching resources, especially when the initial stage requirement is small. Once you get hold of your own capital, you get tied to the business.
Crowdfunding is another popular way of funding a startup business. This is done by getting a loan, pre-ordering, and making contributions or investments from more than one individual at once. An entrepreneur must put up detailed information about the business on a crowdfunding platform.
Popular crowdfunding sites in India include Ketto, Wishberry, Indiegogo, Catapooolt, and Fundlined. Popular crowdfunding platforms in the US include GoFundMe, Kickstarter, Onevcst, DreamFunded, RocletHub.
3. Obtaining Venture Capital or VCs for startup business
Venture Capital, or VCs, are professionally managed funds that invest in companies and businesses with enormous potential. It is an appropriate funding option for small businesses that are way past the startup phase and generate sufficient income. Some popular VCs in India include Blume Ventures, Helion Ventures, Nexus Venture Partners, Bessemer Ventures, Kalaari Capital, Sequoia Capital, Accel Partners, and Canaan.
4. Raising Money from Bank Loans
Banks are generally the primary source of funding for most entrepreneurs. They mainly allow two types of business finances. One is through the Working Capital Loan, which is required to manage a whole revenue cycle for generating business operations. Debtors and hypothecating stocks decide the limitations of these loans.
The other is through the funding from banks, which involves sharing business strategies, valuation details, and project reports to sanction the loan.
Quick Ways to Raise Money for Your Business:
Some of the other methods of raising capital for your business include:
Product Pre-sale: This is done by pre-selling your business products before launching them. With this, you can improve the cash flow and meet consumer demands effectively.
Selling Assets: Selling assets can help you meet the temporary fund requirements of your business. As soon as you overcome the crisis, you can purchase the assets back.
Credit Cards: If you don’t have much capital, you can easily use a business credit card to keep making the minimum payments. It is a readily available method for financing a startup.
Staying without any sort of external funding for long can make it difficult for businesses to take full advantage of market opportunities and expand their businesses. Thus, it is better that, depending on the stage, reach, and funding available internally, the owner should choose the method of raising finance.
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