How to Raise Funds for Startup Business
Today we talk about How to Raise Funds for Startup Businesses. Do you have a startup business for which you want to raise funds? Are you someone who is wondering about the ways by which you can raise funds so that you can keep your business going and grow it? Well, I can feel what you might be going through. Maybe, stress regarding your fundraising Idea, right?
Your stress is justified, though. Because funds work as fuel for any business, no matter if it is a big business or a startup. Without funds, a business or startup can never grow and succeed. And you also cannot ignore the fact that the lack of funds causes 95% of startups to fail in India.
You need funds at every step of your business, and for this, you need to know the ways that could be helpful for you to raise funds or you can say finance your business.
Today, we are going to explore some of the popular ways that businesses and startups use to raise funds and keep themselves going and growing. These fundraising ways that we are going to explore ahead, shall help you, too, in your mission of fundraising. Continue reading ahead and find out the ways of fundraising that might be helpful for you.
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5 Ways How to Raise Funds for Startup Business
#1. By Self-Financing
This is one of the best ways of fundraising that is used by numerous startup businesses. Because getting a loan from the government or approaching a venture capitalist to fund your startup business is not a cakewalk as they will as you several questions. And for this reason, most first-time entrepreneurs choose to self-finance their startup business from their savings. And when they reach the latter stages of their startup business, it becomes easy for them to apply for business loans, and the lenders will also not deny funding your startup business because, by that time, the stability of your business will grow, which will lower the risk factor for the lenders.
#2. Search for the Angel Investors
Wondering who Angel Investors are? You do not need to worry, though. I have got you covered.
Angel Investors are those individuals with excess cash and who are interested to invest in new startups but the risk that comes with these investors is comparatively more than the loans you take from financial institutions. The reason is, angel investors invest for greater profit returns. You will find many angel investors, such as Hyderabad Angels, India Angel Network, etc. These angel investors can easily be contacted by startups or business owners for funding purposes.
#3. Through Crowdfunding
Crowdfunding is one of the most popular ways to raise funds and this way is used not only for or by the business but also for several humanitarian purposes as well, such as disasters, charities, etc. Crowdfunding is the way to collect funds from different investors. This is believed to be the most helpful way for the startup business.
#4. Through Loans under Government Schemes
Several loan schemes are launched by the government, which are aimed to endorse and support startup enterprises. These schemes also encourage socio-economic growth. Startup enterprises can take help from these schemes and get the required fund to keep their businesses going and growing.
#5. Loans Through Private Sector Banks
Startup enterprises consider banks as their priority because these are the places where startups get funds easily. There are two forms in which the private sector provides funds to startups, term loans and working capital loans. However, their loan amount, interest rate, and other related things vary from bank to bank.
#6. With the help of an Initial Public Offering (IPO)
This is another way for startup businesses to raise funds. In this way, a private company, with the help of an IPO (Initial Public Offering), opens its share issuance to the public, which enables anyone to purchase a share of the startup directly from that startup. It benefits both the seller of the shares and the ones who purchase them. This way of fundraising helps the startups to raise funds so that they can accomplish their long-term goals by sharing their rewards with those who purchased the shares of the startups. Though this way of fundraising may or may not be for every business still, it can make them gain a great reputation and excellent profitability.
So, these were some of the ways for startups that shall help startup businesses in fundraising. I hope that this was a helpful article for you to understand how to raise funds for startup businesses.