Want to fund your startup? Here are top 10 ways to do it!
If you are a startup looking for sources to fund your business, you first need to identify the areas for which you need it. For instance, cost of recruitment, cost of facilities such as office, water, electricity etc. and cost of operations, which would include everything from setting up the office to automating it to arranging the furniture!
Once this is done, you might ideally want to approach a Bank for a loan, however, did you consider the alternative methods? Here they are, the top 10 best ways of funding your startup:
- Bank Loans: Banks such as State Bank of India, ICICI Bank and all others offer loans for new businesses and startups and offer them for low interest rates. This is a very popular and common method that entrepreneurs follow. But you need to be careful and must return the money on time in order to avoid legal complications.
- Friends, Family and Peer Funding: When you take money from your friend or family or join hands with them in starting up a new business, things are much easier as you can communicate easily and share all the ups and downs. Several businesses start this way and make good profits. However, make sure there are no misunderstandings or personal problems because of this. Especially in joint families, relationships may get complicated because of strained business relations.
- Online Money Lenders: OnDeck and Kabbage are two online services you could try! They lend money and are very popular amongst entrepreneurs. The transactions are fast and convenient to use and they provide full support in understanding the procedure and Forms to be filled. Of course within a few days of confirming your details, the money comes to your account and you can start the work! However, you need to be very careful with online lenders as at times, there are some fake websites out there ready to fool people. In the United States, this method is highly encouraged and sooner than later, in India this will become popular too.
- Crowdfunding: Kickstarter and Indiegogo are two popular Crowdfunding websites that all entrepreneurs know! The idea with Crowdfunding is to collect money from several small investors and use it for starting new ventures. As exciting as this sounds, you need to be careful and be very sure your business will grow well so that you are able to return the funds and interest on time.
- Debt Funding: This method consists of an investment pool with mutual funds or exchange traded funds that can be used to start a new business. The investments may be in the form of short-term or long-term bonds or securitized products and usually the investment produces a fixed income. The benefit is that it preserves capital regularly and generates consistent income. However the other side of the story is that in this method, returns are not guaranteed when the market situation is bad.
- Equity Funding: This method is popularly known as Stock Funding essentially invest in stocks and generate income. As the Market value increases, the interest earned increases and these funds grow at a consistent rate. However, when the stock market is performing badly, the profits also reduce and may affect the business which uses this method.
- Venture Capitalists: If you are a business that has crossed the startup stage and have started making revenues, this method is very suitable for you. Large amounts of money can be generated by using this method, however, if the business does not sustain and the capitalists do not receive their return on time or see your product growing and making profits, they stop showing interest!
- Grants: If your business deals with science and involves research you may rather approach the Indian government for funding your business. Nationalized banks offer great benefits for startups and provide enough time for you to return the funds. However, the negative factor is that if you, as a business are unable to return the funds on time or do not pay your taxes on time, be prepared to face the legal implications.
- Angel Investors: Google, Yahoo and Costco started by using Angel investors, who helped them not just with funds but also provided them tactical and strategic support! The point is however, that Angel investors expect a high return on their investment, about 20% to 25%, which may not be feasible always, so choose carefully!