Modern Business Funding Options To Consider

This is arguably the most sought after source of capital, especially for small businesses. Self-funding a business idea can be crucial for those testing the entrepreneurial waters for the first time. Financial institutions may be a bit apprehensive to extend loans to new business owners due to the lack of a track record.

The appeal of this method lies in its simplicity: there is minimal to no paper work required. The business owner(s) pool their money and that received from friends and family. Also, the repayment terms are flexible and the interest rate is negotiable, which reduces the pressure on cash flows.

It is one of the newer forms of accessing capitals for companies in which business owner(s) raise requests on online portals to fund their plans by making small contributions. Firms can also ask for placing pre-orders once their product comes out apart from asking for making monetary contributions.

Further, a crowd funding campaign can also function as a potent marketing tool.

An angel investor is similar to a venture capital in certain aspects like taking an equity share in exchange for capital and providing mentorship. They work in networks to screen proposals.

They differ from venture capital funds as that they can provide seed funding as well as on-going support. They can provide capital to a business in its very early stages of growth, which venture capital funds generally do not do. Also, angel investors may have a longer time horizon of investment and may support a company in rough weather.

A venture capital fund comprises of professionals who’re looking for investing in a young business. It is important to note though, that venture capital funding usually comes by when a business is already generating revenues and has either already exited or is about to exit the startup phase. Thus, this source of funding is apt for those businesses that have got off the ground and have potential but are too small to access capital markets.

These are programs, which support early stage companies by providing resources and services, which can help such companies. Incubator programs train early stage firms and also provide them with a network of mentors and investors as well as access to other startups.

Incubators, on the other hand, do a lot of hand holding for businesses at a very early stage of development.

Financial institutions offer capital to businesses in need which can help them grow and also meet the working capital needs.

Various government schemes under the Startup India, Ease of doing business for women and other sections of entrepreneurs are giving an easy passage to raise money for viable projects.