Methods to Get Funds for Startup

India has emerged as one of the top-ranking economies in the world. With just about 400 startup businesses in the country in 2015-2016, the startup industry grew to a massive 72,000 startup business streak by 2022 and is still growing. 

Startup businesses are contributing immensely to the growth of the economy of the Nation. Startups emerging from small ideas like selling homemade pizzas or tea kiosks have emerged as rich companies generating high ROI yearly.

So, if you are someone who has a business idea and no available funding for a startup, this article is for you. Here we will talk about various sources of business finance and guide you on how you can avail of startup funding in the least amount of time. 

Let’s dive in!

What Is Startup Funding?

A startup is materialising a product or service idea that can provide a solid solution to the ongoing problems or demands in the market. Funding for a startup means gathering, calibrating, and collaborating financial resources to shape your business idea and launch it in the market.

Everything requires money: initial setup, launch, operational capital, infrastructural expenses, product development, or business expansion. You don't have to quit the idea of launching a business just because of a shortage of funds. This is where startup funding comes into the picture!

Types Of Startup Funding For Business

You must learn how to get financing for a business. Below are the various sources from which you can get funding for your startup. 

Self-Finance your Startup Business

Your best-case scenario is when you are ready with the funds required to initiate a startup. You may have your savings, or you may have gotten some financial help from family and friends, or even inherited money. You can invest it in a startup and wait for it to grow into a multi-million business.

Apply for Business Loan from a Private/Public Sector Bank

If you don't have your own financial resources, there is no need to panic! The good news is that several public and private financial institutions are ready to help you with startup Business Loans that are available at competitive interest rates. All you need to showcase is steady financial health, stable income, good repayment history, and a decent credit score to avail of an instant Business Loan.

Avail Small Business Loans from MFIs or NBFCs

Whether a self-employed professional or non-professional, you can get collateral-free SME and MSME loans for small businesses and startups from Micro Finance Institutions (MFIs) and Non-Banking Financial corporations (NBFCs) like Hero FinCorp. These loans are generally in the form of cash credit, overdraft, and bill discounting. Compared to Business loans, These are among the best options for startup funding because of their lower eligibility criteria, easy verification and approval process, quick application, and ease of access.

Consider Government Loan Schemes for Funding

The Government of India is encouraging startups by offering notable schemes that can leverage startup funding. These schemes come with zero collateral, flexible repayment tenures, lower interest rate, instant disbursal, and minimal documentation. Some of the best Government loan schemes for startups are National Bank for Agriculture and Rural Development (NABARD), Credit Guarantee Scheme (CGS), Pradhan Mantri Mudra Yojana (PMMY), Stand Up India Scheme, Coir Udyami Yojana, Market Development Assistance (MDA), and Bank Credit Facilitation.

Checkout the Latest Business Credit Cards

We all understand credit cards as an essential tool that helps us with day-to-day purchases and monthly expenses. But are you aware of business credit cards?

Instead of taking Business Loans and committing to regular monthly instalments for the agreed term, you can depend on business credit cards that come with a resourceful management tool, easy acceptance and accessibility across vendors, interest-free credit period, high credit limit, and reward points.

Arrange funds from Online Crowdfunding portals

You can attract various investors through online crowdfunding portals if you have a good social media presence and a large network of friends. The core types of crowdfunding, using which you can attract the attention of investors to help you raise your startup, are rewards, donations, debt, and equity. This system is not a loan, but works more like a grant, where you don't have to pay interest or, in some cases, even pay back the amount received.

Peer-to-Peer Lending

This kind of finance for startups can only be processed by NBFCs registered as Peer-to-Peer (P2P) lenders and has obtained a certificate of registration from the RBI and the Department of Non-Banking Regulation, Mumbai.

Find an Angel Investor

Angel investors are those who trust startups that display high potential and invest their money in return for equity. Angel investors have experience in the industry, a good reputation and network, finance opportunities for potential startups, and invest with realistic expectations.

How Startup Funding Works?

Startup funding begins with a realistic and potential business idea that can lure investors of various kinds and convince them to invest in your idea or help you with resources and finances that can help you initiate your business. 

It starts with a pre-seed and seed funding stage, wherein the idea is recognised, and finances are arranged for product launches. Then it moves to various levels of funding that help you optimise your business, increase market share, develop new markets, and enter into new markets. 

How to Get Startup Funding?

Here are the key steps on how to get funding for a startup:

Calculate your funding needs

One of the most crucial steps involved in funding is understanding how much you need. This includes funds needed to launch your business, hire employees, rent spaces, purchase inventory, and manage operating expenses.

Create a business plan

You must have a detailed business plan before looking for funding options. You should be ready with a summary, a pitch, and a stage-by-stage plan which involves key steps in materialising your dream of running a business.

Check your financial health

Recognising your financial literacy and cash flow before starting a new business is crucial. You need to focus on expenses and ROI, set up financial habits, determine the initial financial needs, and be thorough with banking and operating a business on financial terms.

Research funding options

Before you settle for the best option, research various startup funding plans and opt for the one that assures you maximum financial assistance and the lowest charges.

Make a repayment plan

This is particularly important in the case of financial loans or credit. You should consider the positive and negative aspects of launching a startup and make a plan B - a contingency plan for managing repayment when your business is in operation.

Conclusion

Getting funding for a startup, nowadays, is not as big a situation as it used to be a few years back. Considering the immense growth of startups, several investors and financial institutions like Hero FinCorp can help you with loans and funding options with the most competitive interest rates enabling you to materialise your dream of running your own business.

FAQ

The easiest ways to start a startup without money are by making a cohesive business plan, expanding your digital presence, establishing relationships with financial institutions and investors, researching the industry, market trends, and competitors, and making the most of the available funding resources.

The most common startup funding options are business or startup loans granted by various financial institutions. Financing a new business with the help of a business credit card is also in trend.

To find investors for your startup, you can network with industry professionals, join social media groups, ask friends & families, or connect with NBFCs.

Any private limited company, partnership firm, or limited liability partnership with an annual turnover of less than Rs. 100 Crores can qualify for Startup India.