Meeting the working capital requirements is one of the major challenges faced by start-ups while setting up a new business model. To finance asset purchase, permits, licenses etc. startup ventures require sufficient funds. In addition to this, fund for day to day operation of a firm is also crucial. It covers the cost paid as wages and salaries to employees. Funds are needed by the newly established business ventures to precisely meet their short-term and long-term expenditures. Due to lack of sufficient funds, many new businesses fail during their first year of operations. In order to meet their needs and demands, it is very important for startup and other new businesses to know funding options that they can avail to raise sufficient funds.
A newly established business venture can avail low interest business loan from banks or non-banking financial companies. With an agreement to pay the loan amount with fixed rate of interest within a certain period of time (repayment period or tenure), a startup can avail sufficient loans to finance their short-term expenditures. To promote the industry in India, many technology driven financial firms render working capital loan with flexible repayment scheme. This enables the startup ventures to post-pay or pre-pay the finance amount, in accordance to the cash flow of their business.
A budding entrepreneur can avail sufficient funding from angel investors, who are wealthy individuals ready to invest in startups to gain interests. In addition to providing proper funding, angel investors also provide the new businesses management and business expertise. It is a very popular form of finance that budding companies avails as it allows them to have total control over their business ideas with proper funding and management support. In addition to this, entrepreneurs are able to mentor-ship as and when needed.
Banks, NBFC firms or other lending agencies in India offers business finances to those startup ventures that are profitable and have a hassle-free trading history. In addition to this, entrepreneurs may borrow from their family, friends, and relatives. This type of finance is known as bootstrapping in banking terms. Low or no interest payments are one of the major benefits of this type of finance. Another advantage of this type of funding is that fintech don’t have to go through tedious banking financing processes. However, it is only suitable for startup firms that require very small loan amount.
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In recent times, the concept of crowd-funding of new businesses has gained a huge popularity in India. On a reliable and esteemed crowd funding platforms, an emerging venture may upload the details of their business model. Based on the business model and other details such as business goals, plans for making profit and loan amount required, some of the interested individuals can provide funding for small business.
It is very difficult to choose for the right choice of funding or finance, with a plethora of finance options available in the market. So, it is recommended that emerging enterprises should weigh the benefits and limitations of every finance options available and make a well-informed decision.