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How to raise funding for Startups?

Business enterprises need funds to meet their different types of requirements. Finding funds for a start-up business is one of the most challenging and tiresome tasks. Following are a few important financing techniques that can help one in finding finance.

1. Self-Financing

The best way of financing used by several business start-ups is Self-financing or personal investment. Investing your own savings is the best option for first-time entrepreneurs. In the later stages of business when the stability is achieved you can easily opt for business loans and lenders shall not have a reason to deny it.

2. Angel Financing

Individuals with surplus cash are known to be Angel investors. These individuals invest in early-stage or startup companies in exchange for a low rate of return. This type of financing has been increasing nowadays and high-profile success stories like Uber, WhatsApp, and Facebook are the prominent example in this context. Angel Financing is very proposition because there is a high risk of sacrificing a huge amount of money. India’s popular Angel investors include Mumbai Angels, Indian Angel Network, and Hyderabad Angels. Start-up owners can directly get in touch with these investors for funding support.

3. Peer-to-Peer Lending

Peer-to-peer lending is a type of money borrowing where no intermediaries are involved in the whole process. Lenders lend money to borrowers as their investment and borrowers get money at their disposal to invest in their Start-up. In this process, lenders can earn from borrowers, as the interest rate offered is higher, as compared to banks, NBFCS and MFIs. Peer-to-peer lending institutions are regulated by RBI for the betterment of both lenders and borrowers. For start-up enterprises, peer-to-peer lending is a type of loan, whereas for the lender it becomes an investment.

4. Business Credit Cards

Credit cards for business purposes have taken a rise since the emergence of start-up enterprises in recent years. If your start-up does not require large amounts of funds at the initial stages of business, then you can use credit cards for the purpose of transactions and timely repaying the amount to avoid debt or extra interest rates charged in the form of penalties.

5. Crowdfunding 

Crowdfunding is a concept of collecting funds from multiple investors via social networking sites and web-based platforms for majorly business purposes. Online Crowdfunding web portals raise funds for various other purposes like social causes, charities, ideas, disaster relief, events, etc. This helps in raising funds for start-ups or first-time business owners and also promotes social and cultural causes.

6. Loans under Government Schemes

The government of India has launched various loan schemes that aim to benefit Start-up enterprises, SMEs, and MSMEs. These schemes also aim to promote the socio-economic growth of rural India, women entrepreneurs, educated youth, individuals from the SC/ST category, Small Scale Industries (SSIs), villages, people living in rural and urban areas, etc. Loan schemes initiated by the Government of India to help Start-up enterprises include the MUDRA loan scheme under Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Stand-up India, Atal Innovation Mission, Make in India, Trade-related Entrepreneurship Assistance and Development (TREAD), etc.

7. Loans from Private and Public Sector Banks

Banks are considered to be the first priority for start-up enterprises, as they find it a more reliable and convenient way of getting money. Banks provide funding to start-up enterprises in two forms named term loans and working capital loans. The interest rate, loan amount, and repayment tenure offered shall vary from bank to bank.

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