Here’s How You Can Raise Funds for Your Startup

All startup businesses begin with exciting new ideas and high hopes. However, it is also an unfortunate fact that most startups run into unforeseen financial and operational difficulties within the first year of their operations.

Business researchers often point to a number of reasons that are responsible for the failure of a promising new venture. Yet, the fact also remains that most of these difficulties arise due to inadequate capital.

Capital is the basic requirement for running any venture and no business can be expected to thrive if it does not have proper financing. That is the reason why the concept of investor funding is so strongly embedded in the startup scene. But, raising funds is not only a tedious exercise, it also determines the future of a startup venture. For instance, you may lose the control of your business by giving up a large stake in return for capital funding.

There are a number of ways you can raise funds for a startup business, such as bootstrapping or self-funding, crowdfunding, Angel investment, venture capital, working capital loans, and government programs that help MSMEs. Every one of these methods has its own pros and cons. Let’s have a look.

 

Source:

Pros:

Cons:

Self-funding:

 

Using funds from personal savings or borrowings from family and friends or both.

         -Easily accessible funds

-No bureaucratic hassles

-Flexible interest rates

–       Not feasible for large scale business operations or expansions
Crowdfunding:

 

Getting funds from crowdfunding platforms by making a pitch and getting capital from interested crowd funders.

–       Helps in marketing as well as financing by creating a public interest

–       Allows you to retain control of your business

–       May help attract future investment from venture capitalists

–       Competition is heavy due to the public nature of the platform

–       So, is the probability of your idea getting rejected due to too many homogeneous ideas

Angel Investment:

 

Basically, getting funds from individuals with huge capital worth, willing to invest in new business ideas.

–       An Angel investor can also provide valuable business mentorship along with the capital investment

–       Angel investors are less risk averse

–       The capital provided by Angel investors is often less in comparison to venture capitalists or other business funding methods
Venture Capital:

 

Venture capitalists are professionals who tend to invest in solid business ideas. However, they rarely seek equity and pull out when a business is acquired or upon IPO.

–       Venture capitalists bring a huge amount of mentorship and business acumen to the table

–       They help you design exit-strategies that allow huge profit margins

–       Venture capitalists tend to take away the control of your business in order to recover their investment quickly

–       Venture capitalists are mostly interested in large companies which have a proven business model

Working Capital Loan:

 

A loan from a microfinance company or NBFC that especially caters to the needs of small business owners.

–       Loans are unsecured so there is no risk of collateral loss as is with a bank loan

–       A quick business loan can fast track your income generation

–       Helps small businesses gather their bearings before seeking higher investments

–       No legalities and technicalities in comparison to traditional bank loans

–       None that we can think of
Government Programs:

 

Getting funds from the government subject to institutional scrutiny and meeting the policy parameters.

–       Great way to source funds at low interest rates along with subsidies and other incentives –       Very slow, long, and often tedious process that may take months or even years to get an approval

So, now that you know about the various ways of raising capital for your startup business, the obvious question that needs asking is – which one is the best?

Well, if you are looking for a quick and hassle-free funding, it means you have already tapped in bootstrapping sources. So, the next best thing here will be getting a working capital loan from an NBFC.

Faster Business Loans without Security

Non-Banking Financial Companies offer loans for business without requiring a collateral. NBFCs are also business sensitive and hence provide quick business loan approvals and disbursements in comparison to traditional banks. For example, a bank may take up to 15 days to process your business loan application whereas you can get a business loan approval within 72 hours by applying with an NBFC like Lendingkart Finance.

Flexible EMIs, Interest Rates and Prepayment Options

Working capital loans for business come with the added benefits like a flexible EMI schedule, lower interest rates and zero prepayment charges. If you are a budding entrepreneur, these benefits can be a godsend for your business. For instance, the ability to customize your EMIs allows you to plan your repayment in tandem with your invoicing cycle. Lower interest rates mean you are not losing precious capital in interest payments. Finally, if at any stage your business starts generating expected profits and you wish to repay your business loan in full, there are no prepayment charges, fees or penalties.

Conclusion

Raising funds for business establishment and growth is always tricky. There are a lot of checkboxes that you need to tick before getting the capital you need. Furthermore, some of the most popular startup funding measures are also the most crowded ones as other entrepreneurs are also having the same funding ideas. Whereas getting funds by giving away equity has its own pitfalls in the long-run and can leave you without any control whatsoever over your business. Alternatively, you can get a bank loan for funding your business but that process is also marred by slow processing, bureaucratic red-tape and the huge risk of collateral loss.

So, amidst such tedious and discouraging scenarios, getting a working capital loan or a business loan from an NBFC like Lendingkart is the most plausible alternative for funding your startup. Add to that the many benefits of NBFC business loans, and the fact that you do not have to give away control over your business for getting working capital funds, and you have a winner on your hands.

How to Improve the Chances of Getting a Business Loan Approval?

It takes money to make money. Even if you have a great business idea, it will take some initial investment to market it and bring it to fruition. Unsecured small business loans are a popular choice for quick business finance due to their small ticket sizes and faster approval process. However, not every business loan application gets approved, even if you are applying with a financier who has easier lending rules.

In today’s post, we are sharing the bare essentials, which you should get right, to improve your chances of getting a business loan approval

Improve a lacklustre credit score

If your personal and business credit scores are not in order, there is a high chance that your loan application will get rejected. Worst still, you might be offered a loan with exorbitant interest rates, which will only make it harder for you to repay the loan and further diminish your credit worthiness. So, before applying for a business loan, get your credit report and take steps to improve it. In case you have raises a dispute with the credit bureau, wait for its resolution before applying for a loan, otherwise a lender might deny your loan application based on faulty information.

Make your calculations in advance

If you are starting a new business, assess your financial needs and keep an eye out for lucrative business loan deals even if you do not need the funds immediately. Being aware of your business’s exact capital requirements and institutions that cater to your specific financial needs can speed up the loan approval process significantly.

Have a business plan

When planning for a business loan, have a business plan ready to share with the lenders to convince them of your commitment to repayment. The plan should have an executive summary that explains what your business does, and how you plan to make money. Also include a market assessment and data of present business expenditure.

Get the documentation right

A lender will ask for most recent years’ profit and loss statements, balance sheets and cash flow statements, so make sure you have them in order. Apart from this, business incorporation certificates, tax filings and address and identity proofs are a pre-requisite for business loan approvals. Check with the lender beforehand and get the documentation right to speed up your business loan approval.

Apply with FinTech lenders like Lendingkart

If you need a fast business loans, apply with a FinTech lender instead of traditional banks and NBFCs. Where bank and NBFCs take up to 10 days to process a loan application, a FinTech firm like Lendingkart will authorise loan disbursal within 3 days of application and approval. Moreover, FinTech lending comes with several other benefits like minimal processing charges, low interest rates, flexible EMI options, zero prepayment fees and quick renewals.

To know more about FinTech lending and apply for a fast business loan, click here.