Funding For Start-ups And Small-businesses: Sources and Importance

Every business needs a certain amount of capital, especially at the initial level. No matter how big or small the business is every business needs certain funds depending upon the business execution ideas and the initial costing of the product. A business cannot function without funding; every business is an initial investment in order to gain future profits. However, it is very important that one chooses the sources of funding very carefully as it plays a vital role in the financial position of the business. There are a lot of options and ways to raise funds in the market today, but decisions such as how much funds are to raise when are to be taken wisely. Studies show that the majority of new business face loss in their initial years or even wind up due to a shortage of funds or no funds at all.

Sources of raising funds

Investors: there are a lot of people in the market who have a large amount of capital with them. These individuals have good knowledge of the market, and they are in search of good investment opportunities. The start-up businesses can approach such individuals and explain their business ideas and the estimated profit which can be earned. If the investors like the business plan they not only invest in it but also give several business development and marketing ideas and guidance on every step. In the case of small business firms, a group of good and potential investors can turn any small business into a large-scale business.

Self-funding: one of the best ways for a start-up is self-funding. It is very helpful especially if you are a brand-new name in the market or a new businessman. Self-funding helps to provide capital to your business when you fail to get funds from other sources and investors are not interested in your business plans or ideas. Self-funding is raised from individual or family savings so these funds may be enough at initial or primary level but cannot meet up the capital needs in the long run.

Banks and other financial institutions: as any other business even, the start-ups and small business approach the bank for their financial needs. Banks usually grant loans to start up, and small business is depending upon the business needs, project, and future expansion plans, etc. The bank generally sanctions loans for genuine business needs at a suitable interest rate. These loans may be secured or mostly insecure. In the case of other private financial institutions, they provide a good amount of loan but the process of documentation may be quite a time consuming, and the rate of interests may be comparatively high. In order to avoid future debt, you need to choose financial institutions wisely.

Crowd-funding: one of the latest ways to raise funds is crowd-funding. It refers to taking small amounts from various people; this amount can be in the form of loan or investment. Crowd-funding is usually carried online as various individuals in every part of the world have a potential capital and are looking for good investment opportunities. The fund receiver put his idea of business, estimated profits and the whole process of business on the online crowd-funding platforms if the willing fund providers like it they give their part of share on the basis of earning future interest or return on investment.

Crowd-funding is highly competitive in nature it makes it really difficult for the new entrepreneurs to get funds from this platform until and unless his business plans are totally outstanding and return a high profit. But small and growing businesses can try if their business is rapidly growing.

Online/offline contests: today there are various online and a few offline platforms who organize business contests half-yearly or annually or maybe even frequently. All you have to do is to make a highly competitive and unique business plan and pitch the same to the organizers. For you to win the contest, make sure that your business plan is innovative and convincing. In case you win this contest, you get the assured prize money. Apart from the prize money you also are recognized by the potential investors, and there are high chances that investors approach you up front. Getting fame and media recognization is an added advantage.

Instant funding sources: Apart from the general fundraising sources, in case of urgency or immediate fund requirements you can try few of the following ways:

• You can apply for credit card with good cash limit then turn your credit card amount into EMI. Through this, you can save on the high interest charged by credit cards. Credit cards are delivered to you within 15-20 days and do not need much documentation. These days you also have options to change your debit card into EMI.
• The other way to get instant fund is by selling assets you currently possess. This will give you instant capital and once you balance your business, you can re-buy your assets.
• In case you are hesitant to sell off your assets you can mortgage your properties such a house or shop or in case of assets like gold and silver you can pawn them and get money in return of them.

The role/importance of funding

Funding and business always go hand in hand whether it is the start-up of a business or an ongoing fully fledged business. At the initial level funding is the most important thing for business but in the future steps such as marketing and expansion funding plays an important role. You cannot expand your business unless you have the necessary sources to do so. Also, marketing done on a large scale needs large capital; even though sponsorship can help a little but cost still cannot be managed individually in today’s competitive world. Apart from this, other stages such as large repair and maintenance of office and office assets also needs funds and it is always not possible to use the profit share for such repairs.

Funding is the lifeline of business and should be raised through genuine means and sources in order to avoid future problems.