How to Raise Funds for Start-Up?

(Ms. Rishika Kaushik, Assistant Professor, Maharishi University of Information Technology, Lucknow, U.P.)

The major question, which may arise in the mind of a person who is going to start business is how to manage finances for his/her business, as, generating funds or finances to start any business can sometimes be a very challenging and tiring task.

To make it simple, let us discuss a few important funding ideas or suggestions that could help in utilising funding facilities from leading financial institutions.

1. Let’s Self-Finance Start-up Business:
Self-investment, also known as bootstrapping, is a powerful step for start-up funding, specifically when initial marketers continuously have problem in getting investment without first showing a few traction and a plan for capacity achievement.

2. Business Loan from Private/Public Sector Bank:
Almost every public and private sector bank of India offers business loans for start-ups. A few types of loans for which a start-up can look may be:

• A Working Capital Loan
• A Term Loan (Short & Long-term Loan)
• A Letter of Credit
• A Bill/ Invoice Discounting
• An Overdraft Facility
• An Equipment Finance or Machinery Loan
• A Loan under Govt. schemes
• A POS Loan or Merchant Cash Advance

3. Small Business Loans from NBFCs (Non-Banking Financial Corporations) or MFIs (Micro-Finance Institutions):
NBFCs provide collateral-free MSME loans to small businesses and offer services like a bank. Organisations like Seeds Fincap Private Limited, Self Help Group (SHG), Grameen Model Bank, Rural Cooperatives, Bandhan Financial Services Limited etc. can help start-ups in availing loans.

4. Consider Government Loan Schemes for Funding:
Various loan schemes have been launched by the Government aimed at benefitting Start-up business, like those listed below:

• MSME Loan Scheme
• Credit Guarantee Fund Scheme
• MUDRA Loan
• Credit Link Capital Subsidy Scheme
• National Small Industries Corporation Subsidy
• SIDBI Loan, etc.

5. Through Business Credit Cards:
The need of credit card in credit card industry has immensely increased in few years with the rise of number of start-ups. If start-up don't need a lot of initial money or capital in the initial stages of business, it can utilise a credit card and then can repay it on stipulated time to avoid debt or additional interest in the form of penalties.

6. Online Crowd-funding portals:
Raising money from many investors is the idea of crowd-funding. Generally a business can raise funds through social networking and web platforms. Money can be collected from various online crowd-funding portals, social, charity, creative, charity, events, etc. and can be used for various purposes. Some of the leading platforms in India for crowd-funding are Kickstarter, Ketto, Catapooolt, FuelADream, Fundable, Indiegogo, Milaap, Wishberry, etc.

7. Peer-to-Peer Lending:
Peer-to-peer lending may be called as a way of lending which involves lending without an intermediary/ mediator being involved in the whole process. The money is lent to borrowers by lenders on the basis of their capital, and hence, borrowers get disposable income to invest in their ventures. This type of lending is also regulated by the Reserve Bank of India for the overall development of borrowers and lenders.

8. Finding an Angel Investor:
Angel investors are those individuals who have surplus cash and they are interested in investing in new start-ups business in India, as well as worldwide also. Mumbai Angels, Indian Angel Network, and Hyderabad Angels are some of the India’s popular Angel investors. Start-up business can directly establish contact with the investors for fund support.

9. Incubation & Promotion programs:
Various incubation programs are run by many government and private organisations which focus on providing mentoring, networking opportunities, and seed funding for start-ups business. In India, number of state governments, public or private educational institutes, and social organisations provide incubation support to start-ups for the various fields like agriculture, financial inclusion, and skilling. Our university with the MIIF (Maharishi Incubation & Innovation Foundation) is also offering a major support to eligible entrepreneurs in turning up their business idea into business reality.

10. Venture Capital For Business:
The funds which are professionally managed and invested in companies that have huge potential, may be termed as Venture Capital. This type of investment might be suitable for small business that may have passed the start-up phase and may be already generating revenues.

Hence, let’s look out for the best of the options for fund, and start our own business in more focused and efficient way.