Starting a business of your own is a dream that keeps you awake through the night and pushes you to work as hard as you can till you reach the end goal. At present, there are approximately 582 million start-up business owners on the planet according to a global report. Among these 582 start-up owners, approximately 29% chose to become an entrepreneur as they wanted to be their boss. The ratio of start-ups that began from home is 50%.[1] But launching a start-up is not only about the ability to take risks and the mental decision of going forward with your dream. To begin your start-up journey, the most important aspect to focus on is the capital.
Till now in 2022, approximately 167,076 start-up businesses have been set up around the globe which is an increase of 7.5% from last year.[2] The three important questions to start the journey of becoming a start-up owner are what to sell, where to sell, and the money required to set up. Out of these three, the most time consuming decision is to analyse and calculate the total funding required to set up your start-up. So how can you fund your start-up? Let us find out below.
Top Ways To Get Funding for your Business
#1 Angel Investor
Angel investors are individuals who have surplus capital and are looking to invest in start-ups around the world. These investors look for start-ups with high growth potential for higher returns and the most effective way to seek their assistance is through a well-curated business plan that cleverly highlights the scope of growth in the future.
Risk Level: High
#2 Crowdfunding
One of the recently popular ways to get funding for your start-ups is through crowdfunding. The basic concept of crowdfunding is to collect funds from a large number of individuals using platforms that are available on the web. You can also use social media and raise funding for business purposes, along with other causes. It is an effective way to raise funds and spread awareness for any start-up.
Risk Level- Low
#3 Bank Loans
For almost all capital requirements, whether it be home purchase, car purchase, or others, bank loans are the first choice. In case of start-up funding, bank loans are considered extremely convenient and reliable. Under this category, the bank directly provides you with the required capital, offering a choice of two forms including a working capital loan and a term loan. You have the choice between taking a bank loan from a private bank or a public bank. However, the only difference will be the interest rate offered for the capital required between these banks.
Risk Level- Low/ Medium
#4 Self-Funding or Personal Loans
One of the most common ways to fund a start-up business is through bootstrapping or by personal loans. Under this category, all first-time business owners who are starting the journey can easily pool in all their savings to begin and set up. Once it’s set up, applications for bank loans can be made in the future to keep the cash flow in check without worrying about eligibility.
Risk Level: Low
#5 Venture Capital
Venture capital is another way to raise capital for your start-up. Venture capitals are funds that are managed professionally that are then invested in companies depending on their growth scope. Venture capitals commonly invest only against equity. In addition to that, venture capitals also extend their mentorship, expertise, and other business evaluation support to help start-ups and other businesses realize their scalability potential.
Risk Level: High
#6 Loans from MFIs and NBFCs
At times, there is a possibility of your bank loan application not getting cleared. In such situations, microfinance institutions and non-banking financial corporations come to your rescue. These are financial services that give you the same access to funds as any other banking service but with limited prerequisites and credit ratings that are not favoured by any bank. Additionally, they do not have the legal backing of being a bank so they operate like one without the title.
Risk Level: Low
#7 Business Incubators Or Accelerators
Business incubators and accelerators are another funding option for start-ups. They are programs that are available around major cities and help various businesses every year. Incubators act as a parent who helps the business or start-ups with proper training, networking, and shelter tools. Accelerators on the other hand are similar to incubators but the key difference is that they focus instead on helping the business run its operations successfully throughout.
Risk Level: Low
#8 Peer-to-Peer Lending
Regulated by RBI, peer-to-peer lending institutions have recently become more popular for start-ups looking for initial funding or capital. Under this category of funding, there are no intermediaries involved in the process of lending and borrowing. Some lenders are willing to invest their money into the business ideas of the borrowers and charge an interest rate that is slightly higher than the banks, MSIs, and NBFCs. It is a type of loan where the lender is the investor and the borrower is the business or start-up owner.
Risk Level- Low/ Medium
Final Thoughts
Now that you are well aware of all the different popular techniques of funding available to convert your idea into a successful business, there is no reason to let go of your dream of becoming your own boss. Almost 92% of the current small business owners are exceptionally happy with the way their businesses are operating. So join the group of successful small business owners by taking the first and the most important step towards fulfilling your dream.
You do not necessarily have to begin your business with a brick-and-mortar office. Approximately 30% of the current entrepreneurs that started during the pandemic are not willing to open a physical office because of the convenience of operating from home. [3]However, if need be, you can make use of co-working spaces that are available in a number of over 20,000 all around the world to begin your business discussions and then conveniently shift to a physical office when the need arises. Just draw up your business plan on paper and start working on different ways to get the necessary funding to forge ahead in the right direction.
[1] https://www.thebrandbusinessbw.com/business-statistics-to-know-in-2022/
[2] https://www.thebrandbusinessbw.com/business-statistics-to-know-in-2022/
[3] https://www.thebrandbusinessbw.com/business-statistics-to-know-in-2022/
