Raising start-up capital is a herculean task that most entrepreneurs find daunting. In spite of a promising business plan, proper due diligence and good negotiating skills topped with the determination to make your business a reality, the question that looms large on every individual wanting to take the entrepreneurial plunge is where to start the capital search.
The need for a viable source for your business’s cash needs doesn’t end with the seed or start-up capital alone, but you would need financing for expansion and take your company to the next level. Here are a few options for financing your start-up.
Digging into your personal savings makes up for a considerable chunk of the start-up funds. Next comes the credit cards. Plastic money is not only more accessible but it’s also quicker to raise easy money through it. You will be surprised to know that Google founders financed their efforts through the use of credit cards. The only drawback is that it’s easy to fall into its lure and rack up a huge debt thus damaging your credit rating.
Friends and Family
In the initial stages, most start-ups are funded by family, friends, and colleagues. Usually, such type of financing is informal as you don’t need to formulate a business concept beforehand. But it is rare that the level of available funding from these sources is sufficient.
For most start-ups, banks are usually reticent in shelling out money. But if you have excellent personal credit, have a good track record and wouldn’t mind pledging your home/tangible asset as a collateral, getting a traditional bank loan might work out for you.
Small Business Grants
The government lends grants to support technology and innovation by start-ups. There are also a limited number of government grants for women and minority-owned businesses. You can approach the local Chamber of Commerce for grants for your small business start-ups.
Taking a partner on board might cramp your style but on the other hand, apart from securing funding, the partner might be a boon for the business if he is an “idea” person or a hands-on manager.
Investors, usually high net-worth individuals, lend support to innovative small scale and locally-driven entrepreneurship. Moreover, with their wide experience and knowledge, they also mentor new entrepreneurs by guiding them in their fledgling businesses.
It’s an in-between option for those who have exhausted their ‘friends and family” funding option and are yet not ready to approach VCs. Some More… Crowd Funding is one of the emerging concepts in the world of microfinance and is going to affect the Indian economy soon. It is the amount raised through people who collaborate and network; they may be friends, family, colleagues or strangers on a social networking site.
Then there are far-fetched options like Venture Capital but it rarely works as VCs usually don’t invest in start-ups or even early-stage companies.
There are also a lot of stipulations to abide by that makes it not so lucrative. Still, if your company already has a good performance record and promising returns, it’s worth a try. Picking the right fundraising source is a significant part of the business strategy. Hence, take time to understand what type of company you are building and what type of funding will suit you the best. ************************