Want to Start up Your Own New Business
The following are methods for obtaining funds or loans for a new business.
1) Self-Finance: It is among the most effective ways to obtain funds for many businesses that are starting. It’s far superior to taking out the loan and then paying interest since you are investing only the funds you have. For first-time entrepreneurs, it’s a lifesaver and a risk-free investment. If the business is growing to greater and greater rates, getting a business loan could be an option. Loan lenders are more than willing to offer the loan based on the fact that the company has reached equilibrium.
2) Finding a reliable and trustworthy investor People who have extra cash are referred to as “Angel investors”. They can be a fantastic opportunity to invest in start-up businesses around the globe. There is a high degree of risk involved in “Angel Investors'” investments as compared to business loans from banks and other lenders. The risk is higher since the investors are expecting higher returns from their investments, which can result in massive profits. In India, we have three well-known “angel investors.”
Startup companies can approach angel investors to obtain the necessary funding.
3) Crowdfunding: This can be described as one method for collecting funds from many investors using social media platforms, websites, and platforms. There are online websites that offer crowdfunding. They raise funds to support events, charities, and disaster relief. Through the same program, crowdfunded investors are able to raise funds for entrepreneurs as well as start-up companies . For India, there are several crowdfunding platforms like Fundable, Wishberry, Milaap, Kickstarter, FuelADream, Catapooolt, Keto, Indiegogo, etc.
4) Government-Scheme Loan: Startup businesses may apply for government scheme loans. The Government of India provides a variety of loan plans for startups to help promote rural India’s expansion, to those with small and medium-sized businesses, and to those educating youth and encouraging women to become entrepreneurs, as well as individuals from the SC/ST categories and others.The government also tries to support start-ups by introducing several schemes, such as “MUDRA” that is a component of “Pradhan Mantri Mudra Yojana (PMMY)” , “Trade-related Entrepreneurship Assistance and Development (TREAD)”, “Credit Guarantee Fund Trust for Small and Micro Enterprises (CGTMSE)” , “Make in India”, “Atal Innovation Mission”, “Start-up India” , “Stand-up India” etc.
5) Securing loans through Public and Private Sector Banks: Banks are the most preferred option for business startups . Banks are the most convenient and reliable source for working capital as well as business funds. Banks are comprised of two types of financing that they are able to offer to businesses that are just starting out.
Working Capital Loan
Private and public sector banks can provide these loans, but the amount available is determined by qualifications based on your credit score, as well as time period and terms of repayment, which are different from one institution to another. Therefore, it is recommended to conduct a feasibility study to determine the best bank that is suited for the company’s requirements.
Businesses that are just starting out can borrow money through Microfinance Institutions (MFIs) or Non-Banking Financial Companies (NBFCs). This is a great option if you are new to taking out loans and do not have a strong credit history or financial history. The major drawback of this method is that the rates of interest are higher than those of banks. Another alternative is to rely on credit cards to pay for commercial loans. This is an excellent alternative for companies that are emerging in this day and age. If you’re at the beginning phases of your company, and you do not require huge sums of money, then you can utilize credit cards to pay for those business transactions and pay your bills promptly in time to avoid massive penalty rates for interest. It is possible to incur massive bills if timely payments are not made.
Another way for businesses that are just starting out to get loans is through peer-to-Peer (PTP). It is a method of borrowing in which there are no intermediaries involved. The borrower gets the funds to invest from lenders, and for the lender, it’s like investing, which has high rates of interest as compared to banks, NBFCs, and MFIs previously mentioned.
Bootstrapping can be a reference to self-funding. It is the first and best choice for an entrepreneur starting a new business. The process of obtaining funds in the initial stages is not an easy task since there is no credit or financial record. This is ideal if you have a substantial amount of savings and your requirements aren’t too large. If you need business financing starting from the beginning, then bootstrapping isn’t a good choice to look at.
If you are considering crowdfunding, you must have your business’s strategic plan of action in full detail, describing the business’s structure, realistic goals, goals for profit, financing, and future demands and opportunities. This needs to be posted on social media, and users who are impressed by this concept will provide the money needed to fund it, and thus startups can raise working capital.