A Quick Look at Most Popular Funding Options for Startups

Are you planning to start a business? Have you planned everything down to the minutest detail yet? Most importantly, have you begun gathering funds for the start-up? Not to sound cynical in any way, but as per a recent study, more than 94% businesses fail due to lack of sufficient funds. Since money is the lifeline of every business, it is the first thing that you should start sourcing. Now, how much capital you require depends mainly on the type of business that you are going to set up. Getting a business loan is ideal, and that is what most entrepreneurs aim at. Just remember, putting all your eggs in the same basket is never a good idea. It is not the right business strategy. It is also true when you are looking to finance your business.

Startup Funding - A Quick Look at Most Popular Funding Options for Startups

Sourcing funds from different sources will not only help your business fare better at times of financial turmoil, but it will also increase the chances of you getting sufficient funds for specific needs of your business. It is vital to ensure that none of your sources thinks that they are your sole source of funds. Showing your financers that you have borrowed money from different sources helps them understand that you are a proactive entrepreneur and that you will be putting in your best efforts to establish your business as well as run it properly.

Irrespective of whether you opt for a bank loan, an investor, a government grant or a business incubator, you must remember that every source of finance entails specific sets of advantages and disadvantages. They also have specific criteria that you must meet to be eligible for the loan. These criteria are usually set to evaluate your business and its chances of success.

Now, there is no need to stress over where and how to get the required capital for your business; there are many! Take a look at the most common funding options to raise startup capital for your business:

Crowdfunding: A relatively newer way of funding a startup, Crowdfunding is a method that has already garnered much popularity. It is much like taking a loan, pre-order or investments from a crowd of people rather than just one person. An entrepreneur uploads the details of his business on a crowdfunding platform with a particular focus on his goals, profit-making plans, his budget, how much fund he needs, the reasons he has opted for crowdfunding and so on. After going through the details, those who are interested in investing in the business usually make pledges by offering to pre-buy the product or make a donation. The most interesting fact here is that anybody who believes in that company can invest in it. Also, crowdfunding helps to generate interest in a product or a company, before it even comes into existence. Thus, it also helps with marketing along with fund sourcing.

Bank loan: This is probably the most common method of sourcing money for your startup. Usually, banks are the first places where aspiring entrepreneurs go for capital. Banks provide two types of loans, one is startup capital, and the other is funding. The amount of the startup capital loan is determined after hypothecating stocks and debtors, and it refers to the money that is needed to run one whole cycle of revenue-generating operations. The latter involves sharing the business plan along with valuation details and project report. Depending on these factors, the business plan is evaluated, and the sanctioning of the loan depends on the result of that evaluation.

Business incubator: If your business is in the early stage of planning, you can consider going for business incubator and accelerator programs. These programs are available to aspiring entrepreneurs in almost all major cities and assist hundreds of new businesses in finding strong footing in their respective industries within a stipulated span of time. It is to be understood that there is a fundamental difference between incubators and accelerators, as evident from their names. While incubators, much like parents, help to nurture a business by providing training and infrastructure, and thus, establish it in a way. Accelerators, on the other hand, help a company to grow by leaps and bounds. These programs typically run for a span of four to six months. One of the significant benefits of choosing these options is that you do not just get money but also valuable guidance. Moreover, you can also make good connections with investors, mentors, industry experts and more. These connections can undoubtedly prove to be beneficial, not just in the present but also in the future.

Venture capital: Venture capitals are best described as professionally manages funds that are invested in companies with lucrative prospects. Usually, venture capitalists invest in a firm against equity and exit, especially when there is a scope of an IPO or an acquisition. Venture capitalists provide guidance and are mentors to new entrepreneurs. Also, their offerings serve as a test for the business as it is judged from sustainability and scalability aspects.

The above options are the most opted for when it comes to sourcing funds to start a business. No matter where you borrow money from, remember that there is a specific time span within which you will have to repay the loan. While it is instrumental that your business runs smoothly and starts making a profit after the initial hiccups so that you can start repaying your credit as well as make some savings, it is also important to stick to a budget to avoid gathering more loans. Experts suggest availing the services of a financial advisor in this regard. A financial consultant can identify problem areas in your business and lifestyle that may be increasing your expenses, and they also suggest corrective measures. Their advice and suggestions can help you figure out a budget for yourself. As a result, you can pay off your loans on time and also make substantial savings, which can be later used to grow your business.

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