Every entrepreneur believes his start up is a winner, and that his business idea is brilliant. But that’s hardly enough. You may have a very good business idea and great plan but without funding the business is unlikely to succeed. A new business start-up needs various funding sources for completing its initial business operations. Capital generation is a tough and very crucial step in the entire process of setting-up a business. However, getting money for business is not the only thing to think about, selecting the right funding source is also equally important. Raising money should be seen as part of the challenges for entrepreneurs.
There are multiple easy ways of generating funds for new business start-ups for every entrepreneur:
· Crowd Funding: Crowd funding is one of the best online fund raising practice. As each contributor has to invest a very small amount, it is not much difficult to convince. It is the process of raising money to fund what is typically a project or business venture through many donors using an online platform. Many entrepreneurs have used the unique method of crowd sourcing to raise finances for their business. Most of the people take part in crowd funding for getting some rewards or benefits related to the product or service that the new business is going to offer. These funds are usually generated from the personal savings of the investors. It happens when you suggest a business idea and other people show interest in it and decide to invest in your idea. The investors offering their money to your project through crowd sourcing are also a good way to collect feedback about your business idea and its feasibility.
· Entrepreneur or angel investors: There are many business owners and entrepreneurs who have achieved success and profit in their prospective business and are interested in investing in new start-up businesses. These investors are the best source of business funding because they are experienced businessmen and they can better understand the needs and the ups and downs of a new business. Angel investors are individuals who provide seed funding for startups or entrepreneurs in return for ownership equity or debt repayment. They not only offer finances but also serve other benefits. The advices, suggestions and contacts offered by these entrepreneur investors can also help you in setting up and promote your business in a better way.
· Bank Finance: Banks are an important part of the economy. Along with deposits and savings accounts, banks are also involved in lot of other activities to raise money. Like all other businesses banks also need to raise capital. Banks raise capital through various financial investments it provides for different kinds of customers. Banks are the most common fund raising options. Most of the small business start-ups go for bank loans to meet their initial financial requirements. The entrepreneur offers any of his assets as a guarantee and takes a loan amount against it at a certain rate of interest and some pay back terms. A person can go for a business or personal loan from his bank. What’s more if you are a startup or need funds without the ability to offer a collateral security, you can avail funding from banks under various central government schemes like CGTSME.
· Business Partners: You might not have the money to fund your startup on your own, but perhaps you know someone who could help you. When selecting a business partner make sure you share the same business goals, because they will have as much control as you over the direction of the business. It also helps to have a buyout agreement in place in the event that the business relationship goes sour. The Business partner can offer your business the much needed financial support while sharing the burden and responsibility of running the day to day business affairs. Business partners can also help in generating good amount of financial capital for starting your business. The partner will invest in your business idea and in return he will own some power and shares in your business.
· Venture Investors: Venture investors are big and very rich investors. Each of these investors possesses high value assets and are financially so strong that even if some of their investments get in losses, they do not get much affected. The goal of a venture capitalist is to aim to invest early in a business that shows high potential for growth. Venture capitalists traditionally receive equity in the business they're funding; these days they may request a combination of equity and debt financing. Approximately 3 out of 4 businesses with venture capital funding fail. Venture capital funding may not be a viable option for you if the market you're in is fairly modest. Venture investors make investments later on, to grow and develop the basic existing business.
· Private Loans from Friends and family: Some of the most easily available sources of capital for a small business start-up are the informal funding sources. These informal sources include friends, family and relatives, who offer you money as credit for starting your business. Most successful tech startups raise their first capital from friends and family investors. Your friends and family members are more willing to invest in your business because you are not a stranger to them. And they are less likely to scrutinize every comma and semicolon in your business plans as angel investors do. You can raise money quickly, since your close ones are usually free of those factors that delay feedback from third-party investors. Most of the time, these types of credits are interest- free and do not involve any payback terms. Since family and friends are part of the closets people around, they are more likely to lend a helping hand for the business.