How to raise funds for a company
When you start a business, you must also ensure that you have the proper funding option available. According to a recent study, most businesses fail due to a lack of funds. Raising funds for a new company involves various risks factors also.
Fundraising is nothing but seeking financial support to start a business or any charitable organization. Here are a few funding ideas that will be useful for your company.
Crowdfunding is one of the funding options available for a start-up that has been gaining a lot of popularity lately. Crowdfunding is nothing but taking a loan, pre-order, contribution, or investments from more than one single person at the same time.
Detailed information of the business is put up on the crowdfunding platform. The company needs to mention the goals of their business, plans for making a profit, how much funds they require, etc. Customers will have access to all such information and fund the business if they seem to like the idea.
Crowdfunding generates interest and also markets the product by providing financial help.
Angel investors are individuals with surplus cash who are keen on investing in upcoming start-ups whose business ideas seem impressive. These angel investors work in groups of networks to collectively conduct research on the proposals before investing. In addition to funding, they also offer mentoring.
Venture capitals professionally managed funds and invest in companies that have huge potential. Venture Capitalists not only provide expertise but also, mentorship and help in evaluating the sustainability and scalability of the business.
A venture capital investment is best suitable for small businesses that are beyond the startup phase and already generating revenues. Companies that have a fast growth like Flipkart, Uber, etc with an already existing strategy in place can gain a good sum that can be used to invest in the growth of the company.
Banks provide two kinds of financing for businesses. Namely, working capital loans and funding.
- A Working Capital loan is the loan that is required to complete one full cycle of revenue-generating operations.
- Funding from the bank involves the usual process of sanctioning loans by sharing details like the business plan, valuation details, and the project report.
Microfinance and NBFC
You’re left with other options when you do not qualify for a bank loan. Microfinance gives access to financial services for those who do not have access to conventional banking services. Microfinancing is popular for those whose requirements are limited and credit ratings not favoured by the bank.
Bootstrapping is one of the ways that ensure positive cash flow. This is the most inexpensive and effective means of raising funds to start a business. Bootstrapping is nothing but using up already saved funds or borrowing money from friends and family. Bootstrapping is easy as there are lesser formalities involved when compared to other funding sources.
Government programs are an excellent way of raising capital to start a business. Once your business plan has been approved by the grant committee, you’ll be eligible to receive funds from the government.
Funds are very important for running a business entity. Most businesses fail due to a lack of funds. Funding is an important aspect of meeting the goal of the business.
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