Financing Sources for Small Businesses and Start-ups02 Feb, 2018 2893
Nowadays, most of the college-goers are more interested in starting their own business even if it is on a small scale. Instead of searching jobs, they are now researching about new and innovative ideas that can be profitable as a start-up. And, many options are available on the internet. But, the problem is not about what to do? It’s about how to do? The biggest challenge that every commercial venture faces is to arrange funds in the beginning especially if it is a small one. It might get really hard for young entrepreneurs to raise money and almost 80% of businesses fail due to lack of funding. One may have a great idea to have a successful establishment. However, if there is no sufficient capital, you might fall flat. Although there is always the availability of money out there in the market, you need to know where to find it.
If you are also planning to start a business soon after your graduation, then here are a few funding options for you. Take a look:
Crowdfunding is gaining a lot of popularity amongst these days as it helps to accumulate initial investment quite conveniently. It is a process of raising small amounts from the number of people, especially via internet. It may be loan, pre-order, contribution from more than one investor. An entrepreneur just needs to mention the details of his business on the concerned platform such as goals, plans for profit, required funds, etc., and if any person liked the idea and believes in it, he may contact the former. One of the reasons that people are ready to help is, the risk is comparatively less in this. Of course, it may get competitive to earn funds, so strategy and idea have to be unique and better than the others.
You can also opt for self-funding or bootstrapping by saving enough money for your start-up. It is the most preferred way to raise capital as you won’t have to justify your plan and potential success to anyone and need not share the ownership or stakes with others. Also, there will be less formalities, and low cost of raising capital, no interest rates. This can be considered as the first option due to the positive points but only if the initial amount is smaller. You may even ask your friends and family members for assistance.
Individuals who have surplus cash and a keen interest in any upcoming venture are known as angel investors. They are ready to take huge risk for profits. Some of them may be the retired executives who are ready to invest directly in small businesses. They not only contribute financially but also impart their technical or managerial experience and knowledge. In exchange, they may have certain rights to supervise. There are various angel groups who work as a committee to monitor and screen the best proposals.
Incubators are like a parent to new businessmen as they nurture them and provide shelter, training, and networks. They basically support them at different stages of development. There are also economic incubators who help in job creation, revitalization, and service sharing. They are often used interchangeably with accelerators, who are also same, but they guide them to take a giant leap. This program may run from four months to two years, where they invite future entrepreneurs to share the premises and resources.
This may be quite a complex procedure, but can be beneficial in the starting stage of business. You may have a friend or a family member planning a business in the same field, so you both can get into a partnership firm. Or you can merge with a well-established company who is willing to promote you, advance finance, etc. One important factor that you need to remember is the proper paperwork. Prepare a contract stating all the terms and conditions between both the parties.
These were a few financial sources that may help you whenever you plan your business venture. For more information on any of the above, you can search various websites specially designed for such purposes.
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