Business is the back bone of every society. Every country’s economy depends on business as it provides goods, services and job opportunities to society. And every business either old or new requires finance to start or run their business. It is not possible to run a business without money. Money is the bloodline of all business. According to a study, more than 90% of new businesses fail in their first year due to lack of funding. To start a business we need money, to expand a business we need money, to develop a business we need money and to sustain a business we need money.
There are few ways from where a business can get financial help. ItincludesLoan from Banks / other financial institutions, collection from investors, raise money from friends and relatives, foreign investors, etc.
Bootstrapping : Bootstrapping is the oldest form of financing. It means if a person starting a business and investing money from his pocket or savings, it’s called Bootstrapping. They know how much money have to invest and they are very cautious about their expenses. Study says that it is a very good way to start a business and It’s also good to run for a business for a longer run.
Family &Friends : The second best option for financing is to take finance from family members or friends. Because it is very easy to convenience them for raising funds. This way is very flexible because you can pay very nominal interest(optional) and there is no time boundation for repayment which depends on your mutual understanding. If anyone wants to join your business and wants to invest money, you can allow him to join business and can give them equity.
Angel Investors : Angel Investors would be an individual or a group who havesurplus money to invest in business. First they understand business plan, future of business, estimated investment amount and revenue. It means Angel Investors tend to invest on primary stage of business. They invest their money where risk is high for higher returns. Angel Investors have helped to many startups in their early stages of their business like Google, Alibaba, Yahoo, etc.
Bank Loan : Bank is also one of the best and secure way for finance. Bank Loan is most likely source also. Its depend on the business profile and their experience to invest.Banks are financing to a business for certain period. Business loan likely to have the choice between fixed and variable interest rates. It depends on business profile and their technical experience to invest. Banks provides two types of financing for business. One is Working Capital loan and second one is simple funding.
Microfinance Providers/Non Banking Financial Corporation : If a business didn’t get loan from banks as business is not meeting bank’s criteria then they can apply from Microfinance or NBFC.This is becoming very popular. Its provide small sizes loan with less documentation than banks. It works differently than banks.
Crowdfunding Websites : Now days Crowdfunding Websites is very popular and trending. Crowdfunding Websites can raise money for relatively low cost.This is a kind of contribution or Investment from more than one person at the same time. You can set your goal also on Websites that how much money you need over a period of time. Example – Rs. 50,000 in 50 days. Your friends, family and strangers then use the site to pledge money. This type of raising funds works when you are doing something for a noble cause or for a social development.
How its work – A businessman can put all the details of his business like business plan, future of this business, targets and required funding on Crowdfunding Websites. Anyone can read and if they likes this business plan, they can invest or donate money. Anyone can contribute money towards helping a business that they really believe in inspite of that they know to them or not.
Venture Capital : Venture Capital managed by professionals who invest in high potential companies. They are also responsible for reduce the risk as they are investing other’s people money. They should not take high risk. They usually invest in a business against equity and exit when there is an acquisition or IPO. Venture Capital avoid to invest in startups business unless it is a very exceptional business plan. Their professionals research to find out those business where they believe high returns with less risk in a particular time. Venture Capital find out new market where they can develop their market and increase their revenue. In some companies, Venture Capital provides mentorship and expert advises for fast growth. They are not investing for long term and trying to recover within five years.
Government Plans : In every country, government also provides finance programs to boost or establish business. Government of India also launched finance program named Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA). In MUDRA loan you need to submit your business plan and once its approved, loan get sanctioned. Some of the countries has dedicated portal where candidate can apply and if eligibility criteria meets, government sanctioned the fund online.
Credit Card : Credit Card is also a best and quickest way to raise the money for your business. Initially you can purchases your goods, facility or assets from your credit card and keep paying the minimum amount or you can convert your purchases in EMI.
Product Pre Sale : This is also a way to raise funds. Some of the company sale their products before launching in market. This is highly effective way. Example, Apple iPOD, Samsung Note Book.
Selling Assets : Business can sold their assets. It can help to meet short term fund requirements. Once the situation is good, business can again buy back the assets.
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