7 methods to get funds for your business idea or start-up
Starting a business and making your dream come true is in itself a huge achievement. However, once launched it takes a lot to pressure, energy, time and investment to take it forward and expand. While, pressure, energy and time is something that depends on an individual basis, however investment is something for which a business owner will have multiple options. For executing your business plan, you need different resources which needs funding.
As per the research there are more than 1200 start-ups that come up every year, but 90% of them shut down due to the lack of innovation and enough funding. When you’re working on a new business idea, you need the best of resources; an online space in terms of website, office space, marketing, the list will go on.
And to fulfil all of this, you will need funds. You will need working capital to cover your operational costs. That is why funding is of utmost importance to consider. Let us take a look at different types of funding.
Friends & Family Funding
Whenever you’re looking for minimal working capital for quick funding your business, it is okay to ask from friends and family to invest. However, when you’re opting for this medium of business funding, you have to you should ensure that you share a healthy relationship with the lender Secondly, remember that your friends and family are investing in you and not in your business. Also, it is recommended to not only depend on this source and pressurise them for investing money. This type of funding is only considered as a quick funding option when you’re looking to kick-start your business idea.
Loans from NBFCs
NBFCs are financial institutions that are providing financial help under the regulations of RBI. These NBFCs offer banking services, such as providing MSME loan funding without collateral. With their online application process, as a business owner, you can fill your application and upload all the required documents online and that too hassle-free.
Moreover, some of the leading NBFCs like Ziploan allow business owners to avail a business loan with only the basic eligibility criteria and minimal documentation, to apply for a business loan without collateral. Nevertheless, NBFCs are gaining a lot of popularity in the market as they are not only safe, efficient, but also a medium for fast funding.
Crowd funding is one of the most popular way of getting funds. Crowd funding is a process of getting business funds from social networking to fund a business venture. This is an ideal mode to avail quick funding for start-ups, especially the ones who do not qualify to avail a business loan.
It is a best way to get funds without bearing any burden of business loan interest rate. All you required to do is list your fund amount on a crowd funding platform with a short brief of your business. If your business idea is interesting to the crowd, they will be funding your business idea and in exchange will become your priority customer of your products/services.
Angel Investors / Venture Capitalists (VCs)
For MSMEs, an angel investors or the venture capitalists is a good option for business funding. Though these third party investors are just there to fund you with for your small businesses, however they have their criteria which may vary. Angel investors are a group of individuals who invest own money in businesses which are in their early start up phase of in exchange for equity ownership.
Whereas, VCs are professionals who would like to invest in MSMEs, where they think they might get growth and good returns. VCs usually put a 5-year time period to recovering their investment with good ROI.
Bank Loan is always thought of as a first option in any businessman’s mind who are looking for business funding. It is one of the most common practice which involves dealing with different local banks. However, applying for a bank loan is always a time consuming and a tedious job.
This process can take weeks or even months. Apart from that, you will also be required to deposit some collateral (asset) as a security and prove your creditability to the bank. Because of such stringent rules along with high interest rates, bank loans are becoming less favourable these days by MSMEs.
Government of India has launched a couple of schemes in the interest of the rising business owners and their start ups. Some of famous ones includes mudra loan scheme, CGTMSE loan scheme etc. Under the mudra loan scheme, entrepreneurs can raise up to Rs.10 lakhs of business funding, depending on the type of business. Further, this mudra loan is divided into three categories – Shishu (loan up to 50,000), Kishor (from 50,000 – 5 lakhs) and Tarun (from 5 lakhs-10 lakhs). While under CGTMSE loan scheme, primarily covers the gaurantee of business loan to first generation business owners so that they can expand their business without worrying about the security. In turn the NBFCs are provided with the cover for the absence of collateral to fund MSMEs and to encourage businessmen to a certain limit.
Considering the various sources to avail funds for your business, it is crucial to decide what your business wants. Some of the good options, however, would be to opt for loan options that give you quicker funding for your start up with a low-interest rates and the one with minimal or no collateral at all. NBFCs such as Ziploan can be a boon for all the start-up businesses that are in need of financial assistance with minimal formalities.
Disclaimer: This is a company press release. No HT journalist is involved in creation of this content.