5 Best Ways to Fund Your Small Business Idea

I personally know many people who want to start a small business but are scared to fail. Some even have great business ideas but, due to their fear don’t take the first step. Apart from this fear, one very common reason people don’t establish a business is lack of funding; and the ones who establish, more than 90% of them fail in their initial year, due to poor funding. Till now you must have understood that money is the bloodline of any business. To run a business, for the long term, a fuel is required called capital. But you do not need to worry now, because here is a list of ways to finance your business or business idea. You can pick any one or combination of these ideas.

5 Ways to Finance Your Business

1. Crowdfunding

The funding method which got everyone’s attention is crowd-funding. It is a new method which is gaining a lot of popularity among youngsters. It’s like getting a loan, contribution, or investment from lots of people at the same time.

The entrepreneur has to put the details of his business on some crowd-funding website. He has to mention the goals of his business, plans for generating sales and profit, amount of funding he needs, etc., and then the interested clients read the proposal and invest if they like. Some very popular crowd-funding platforms are Wishberry, Onevest, Kickstarter, etc.

2. Angel Investment

Angel investments have helped many prominent companies like Google, Yahoo, and Alibaba. Angel investors are individuals with excess cash and a will to invest in profitable start ups. They also work in groups sometimes to collectively analyze the proposal before investing.

This funding method can be looked to at an early stage of a start up only and the investors will mentor you, so that your business generates profit and they get their share.

3. Venture Capitalist

They are the investors who look for big potentials in companies and generally invest against equity. A VC may be appropriate for a business who have surpassed their starting phase and have already started generating profits. Companies like Uber and Flipkart use this funding method to grow.

However, VC’s are not loyal to the companies, they are loyal to the revenues. If you don’t have a highly-profit oriented idea, then venture capitalist may not be interested in you.

4. Bootstrapping

Ever heard of this term, Bootstrapping? It means self-funding and is an effective way of financing a start up. You can invest from your savings or can get some help from friends and family too. It is the easiest method of raising funds because friends and family are generally not very rigid with the interest rate. This is suitable when the initial investment is not too large and you don’t want much formalities and compliance. Therefore, start saving from now if you want to establish a start up.

5. Loans

Bank loan is the only funding method which many start up entrepreneurs get when establishing their business. Banks analyze your previous finance records, idea, purpose of establishing the business, and then only sanction the loan. Bank usually gives two types of loans; one is funding and the other is working capital loan. In working capital loan, the bank provides the amount required to run one year of operations, while in funding, the business plan, and project report is shared, based on which the loan is sanctioned.

Bonus Way: Contests

Government, as well as various big organizations, organize several contests where you just need to submit your business idea or product; and if you win, they will fund it. Winning these competitions will also get you some media coverage which is very beneficial for the business.

This is a competitive method to get funding and you have to convince the investors that your idea is worth investing.

So, that’s all from our side!

These were some best ways to get funding for your small business. Now the question arises - “How can I prepare myself and my start up idea for fund raising?” It’s better to start with the basic and easy methods. Getting funds is easier than ever because of the availability of a plethora of lending options. You just need to work smart. Remember funding is very necessary to grow the business.

Summary: If you are planning to start a business or have already started one, and searching for the ways to finance it, then this post should be on your reading list. It contains some best ways to get funds for a small business.