Funding Guide to Your Small Business Idea

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Funding Guide to Your Small Business Idea

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Businesses are primarily driven by the unique
ideas that build them. However, the lifespan of a
business is entirely dependent on its ability to
sustain and grow. Which means it requires money
technical equipment, office space, website,
initial financial security to pay bills and so
on. You require at least a little bit of
financing to get going with your small business
idea. Therefore, understanding the concept of
business funding for start-ups is significant to
succeed. Starting your own venture could seem
like a nightmare, but its worth it! Studies
prove that 94 of start-ups or new companies fail
to sustain during their first year of operation.
Coming up with a billion-dollar idea for a new
company is cool. But, the journey from having a
view to building a profitable business can be
challenging. In that case, how to finance a
start-up business? Funding mainly requires you to
understand the nature and type of your business
thoroughly. Do you want to take a tour to find
out how to get funding for a business idea?
Congratulations! You are at the right place. This
article is a part of our comprehensive guide on
small business ideas  explore the small business
funding guide to know the effective financing
options recommended for Indian enterprises. From
traditional bank loans, lenders to alternative
financing methods heres everything you ought to
know to fund your business idea.
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10 Funding Options to Raise Capital for Your
Small Business Ideas
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1.   Bootstrapping

• Bootstrapping, also known as self-funding, is the
  go-to funding option for most business owners. It
  is proved to be the most effective form of
  financing a start-up or enterprise, especially
  while starting. Entrepreneurs prefer funding
  their enterprise by accumulating any personal
  funds they can find. It could be their savings,
  or a share from their family members/friends,
  credit cards, or home equity lines. Raising funds
  within your closed circle reduces the stress of
  paperwork or compliances.
• Usually, it is ideal to utilize the money you
  have rather than borrowing capital. Experts
  suggest that business owners must continue to
  bootstrap until their venture turns profitable.
  It is an excellent approach towards potential
  success and rids you of the burden of paying
  interests. Moreover, people tend to work hard
  when their own money is on stake. When you want
  to scale your business at a later stage, you can
  consider pooling in outside sources for
  financing. All-in-all, bootstrapping can be the
  medium for expanding resources both financially
  and non-financially.

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2.   Angel Investors

• The second-best funding option for your new
  business is to approach angel investors. Who are
  angel investors? You can usually find this type
  of investors in networking groups where they
  selectively collect proposals for investing.
  These passionate investors are ones that helped
  launch high-profile companies like Google, Yahoo
  and Alibaba.
• Angel investors are more likely to invest in your
  small business, provided you approach them in the
  early stages of your enterprise growth. These
  investors throw themselves in risky scenarios
  while investing to obtain higher returns
  expecting up to 30 capital gain. If you think
  this is an ideal business funding option, look
  out for some of Indias famous angel investors
  and draft a precise plan to pitch them.

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3.   Venture Capitalists

• Venture capitalists are an ideal funding option
  if your company requires higher capital sourcing.
  These investors are likely to dig deeper into
  your business plan before bringing a tremendous
  amount of money into your enterpise. Venture
  Capitalists prefer investing is businesses that
  stand out from the rest.
• Alongside investing venture capital, they also
  expect a return of 3 to 10 times more than their
  original investment cost within a timeframe of
  5-7 years. Quick tip? Better keep an exit
  strategy ready. Tap into your contacts to hunt
  for a venture capitalist a cold approach is less
  likely to fetch positive results.

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4.   Crowdfunding

• Crowdfunding has gained immense popularity
  lately. The new funding option has been providing
  a financial boost for several businesses in
  India. It is a platform that allows businesses to
  pool some small investments from multiple
  investors rather than depending on a single
  source of investment.
• You can benefit from crowdfunding by increasing
  your initial working capital required to start
  your business. Do read about various crowdfunding
  platforms for stock option before selecting one.
  Selective platforms might charge payment
  processing fees or demand business owners to
  uplift their financial goals to preserve the
  collected funds.

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5.   Invoice Financing

• Invoice financing is one of the best funding
  options to maintain the cash flow your business
  requires for daily operations. This funding
  option is also known as factoring, where your
  service provider lends you money from your
  accounts receivables that you can pay back when
  your customer scans the invoice. Invoice funding
  is a great way to bridge the payment gaps between
  your business bills/payments and your
  suppliers/contractors. It allows a growing
  business to accept new projects and provide
  effective results.

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6.   Business Incubators Accelerators

• Considering incubators and accelerators to raise
  money for the business at an early stage is a
  good idea. These funding programs have been
  popularly helping businesses in India and are
  available in every possible city. Their utility
  is interchangeable despite the fundamental
  differences between them. They operate by
  providing training tools, business networks, and
  support for enterprise growth.
• Incubators help nourish and aid businesses in
  standing out in the market place, wherein
  accelerators assist the business in taking a big
  jump that helps keep them running. These programs
  typically demand 4-8 months of commitment from
  the business owners. It helps develop great
  relationships with mentors, investors and other
  competitors.

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7.   Partner Financing

• The strategic partner financing is one the
  commonly known funding option. You can get a
  trusted partner interested from your industry to
  invest in your venture in exchange for exclusive
  access to your business data, products, items,
  distribution channels, sales or a combination of
  all these elements. Due to the commonalty, this
  funding option is usually overlooked.
• You can also partner with another company that
  can boost your business growth. It is considered
  a risk capital that offers a share in sales it
  can either be equity-based or commission-based.
  Partnering with large companies helps build a
  better network of clients, suppliers and provides
  access to great marketing programs.

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8.   Bank Loans

• Conventional banks in India offer business loans,
  provided you have necessary proof and records.
  You can easily avail these loans if adequate
  assets back your business. Banks usually provide
  various financing options with an ideal business
  plan, you can quickly secure your funds by
  availing loan programs. What to do in case you
  are not eligible to request for a bank loan? You
  can always lean on microfinance funding to access
  financial services when you cant rely on
  traditional banks. They have limited requirements
  whose credit ratings are not influenced by the
  banks.

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9.   Government Programs

• One of the most reliable funding options for
  entrepreneurs and start-ups in India are
  government programs. The Government of India
  launched a start-up fund project worth Rs 10,000
  crore under the Union Budget to strengthen SMEs
  ecosystem in India. Further, the government also
  launched Bank of Ideas and Innovations to
  encourage innovative products and business ideas.
• The government supports the Pradhan Mantri Micro
  Units Development and Refinance Agency Limited
  (MUDRA) to help spread the benefits to around 10
  lakh SMEs in India. Under this scheme, business
  owners are provided with a MUDRA card
  post-approval of the loan amount request. It acts
  like a credit card through which business owners
  can purchase raw materials and cover other
  expenses.

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9.   Government Programs

• In addition to central government schemes, the
  state government has also established various
  programs, Kerala State Self Entrepreneur
  Development Mission (KSSEDM), Rajasthan Start-up
  Fest, Maharashtra Centre for Entrepreneurship
  Development, so on to support small businesses.
  Besides, SIDBI Small Industry Development Bank
  of India also provides commercial loans to the
  MSME sector.
• Provided enterprise meets the eligibility
  criteria, government schemes and programs are the
  best funding options compared to the rest. It is
  vital for business owners to educate themselves
  about various government initiatives research
  thoroughly about the Indian governments Start-up
  India Action Plan. Recently, GOI announced a new
  program Atmanirbhar Bharath, a package to
  combat the COVID-19 economic crisis.

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10.   Quick Financing Options

• Funding options for enterprises have increased
  drastically over the past decade. Apart from the
  popular financing option mentioned above, you can
  also try out other ways to raise capital.
  Although these options may not apply to all
  enterprise types, its worth exploring these
  options.

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Product Pre-Sale Selling your products before the
official launch is an effective funding strategy.
Sadly, not many businesses in India follow this
funding approach. Some of the most popular
companies worldwide follow this funding option to
improve their cash flow and prep themselves for
the consumer demand. Asset Sale Asset sale can
be a daunting process in terms of raising funds.
But look at the bright side, it helps meet the
short-term enterprise requirements and finances.
You can always re-purchase the assets once your
venture becomes stable. Credit Cards Having a
business credit is a boon it is the best funding
option that provides instant cash. If your new
business idea doesnt require a lot of
investment, you can use business credits cards to
cover your small expenses. However, beware of the
interest rates and card costs. They can sum up
into a large amount and accumulate in no time.
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Conclusion

• Finding the best financing option can be the most
  challenging part of starting a business. It takes
  a clear understanding of your business model to
  decide what option best suits your enterprise
  requirements. However, once you crack the deal,
  save some capital, get your loan approval, or
  outsource money from investors, you will likely
  see your business grow. Although it might take
  quality time for you to succeed in this journey,
  your dreams will undoubtedly turn into a reality.
  Finding allies along the road friends,
  investors, capitalists will ease your burden.
• Businesses in India must focus on their finances
  in their early stages and later. Is your small
  business ready to see the limelight of success?
  Implement an all-in-one business intelligence
  software that keeps you up-to-date and modern.
  You can always rely on Imprezz cloud-based
  invoicing software to streamline your small
  business accounting. The GST billing system will
  help keep your business GST compliant.

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