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Sources of Funding For Small Business: 1) Bootstrapping Your Startup Business

1. Bootstrapping by raising funds from personal savings, family, and friends is an easy option that maintains control over the business without formalities or losing equity to investors. 2. Taking pre-orders or advance payments from customers before a product or service launches can improve cash flow and make customers early investors. 3. Other options include obtaining bank loans or loans from non-bank financial companies by sharing business plans and financial projections, crowd-funding platforms, and government programs that provide startup capital such as grants and loans from organizations like SIDBI.

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703 views3 pages

Sources of Funding For Small Business: 1) Bootstrapping Your Startup Business

1. Bootstrapping by raising funds from personal savings, family, and friends is an easy option that maintains control over the business without formalities or losing equity to investors. 2. Taking pre-orders or advance payments from customers before a product or service launches can improve cash flow and make customers early investors. 3. Other options include obtaining bank loans or loans from non-bank financial companies by sharing business plans and financial projections, crowd-funding platforms, and government programs that provide startup capital such as grants and loans from organizations like SIDBI.

Uploaded by

Chietransh Jain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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SOURCES OF FUNDING FOR

SMALL BUSINESS

1) Bootstrapping Your Startup Business:


You can invest from your own savings or can get your family
and friends to contribute. These funds would be easy to raise due
to less formalities/compliances and without losing your control
over business to investors. In most situations, family and friends
are flexible with the interest rate.

2) Product or Service Pre-Sale: Taking advance fees


and money from your customers before your product or services
gets launched is an often-overlooked and highly effective way to
raise the money needed for financing your business. Remember
how Apple & Samsung start pre-orders of their products well
ahead of the official launch? Make your customer your investor
and improve your cashflow in the business.

3) Raise Money Through Bank Loans or NBFCs:


Funding from bank would involve the usual process of sharing the
business plan and the valuation details, along with the project
report, based on which the loan is sanctioned.
4) Crowd-Funding:
Crowd-funding is the practice of funding a project or venture by
raising small amounts of money from a large number of people,
typically via the Internet platforms such as patreon and
kickstarters.

5) Govt Programs That Offer Startup Capital:


Different states have come up different programs like Kerala State
Self Entrepreneur Development Mission (KSSEDM), Maharashtra
Centre for Entrepreneurship Development, Rajasthan Startup
Fest, etc to encourage small businesses.
SIDBI – Small Industries Development Bank of India also offer
business loans to MSME sector.
If you comply with the eligibility criteria, Government grants as a
funding option could be one of the best. You just need to make
yourself aware of the various Government initiatives.
6) Get Funding From Business Incubators &
Accelerators:
For early stage startups, accelerators and incubators offer great
ways to grow their businesses.

Business incubators provide new businesses with office space


and shared facilities, such as telecommunications systems and
Internet connections, in a dedicated building. Entrepreneurs can
also access advice and guidance from professionals such as
accountants, marketing consultants and business advisers who
are associated with the incubation center and act as mentors.
Entrepreneurs typically stay in an incubation center for three to
five years, although there is no maximum period.

Business accelerators share some of the characteristics of


incubators, offering professional advice and guidance to
startups. However, the incubation period is very short and
intense. Accelerators aim to turn business ideas into prototypes
or products that are ready for market in a matter of months.
Sponsors provide initial funding and expertise to small groups
that can demonstrate a great product idea. In return, the
sponsors take a small equity stake in the new business, which
might be around 6 percent of total profits made by the company.
The emphasis in business accelerators is on rapid growth and a
successful product launch.

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