When one is starting a business the constant need for capital is unavoidable. There are various different forms of acquiring the capital for a startup and every method has its advantages as well as disadvantages. So instead of worrying yourself and becoming indecisive, as to which method would be appropriate to gather money for starting your own company, go through the brief overview of each procedure and decide the right one for your business.
Bootstrapping and obtaining capital for startups have been a long proved and tested method by many reputed startup founders. This method makes you independent of the opinions of investors. You can use whatever little resource you have to take your business to the next higher step. Use your personal savings or home-equity loans and do everything possible on your part to fulfill your long desired dream.
Government grants are a very secured way of getting your startup foundation money. Government grants money to startups for their due market research and to execute their business plan. The only condition provided is that the owners must depict that their plans will finally conclude in producing proper services or goods that can be released in the market. There are risks too. Generally you would have to work under a restricted timeline and show effective results by the end of the deadline. If you are unable to achieve the expected result then a form of fine needs to be paid. However, if you have met the expectations then government grants are not essential to be repaid.
Borrowing money from friends or family is also a good option since such informal terms of getting capital has many advantages. There is negligible rate of interest on the borrowed amount. And most importantly there is no last date to repay back the amount. You can take as much time you need to finish your work and execute your plan and then return the money as and when possible. However when money is mixed with blood, love flies out of the window. You might ultimately get strained relationships and relatives who are interfering into your business too much just because they have paid for it. Annoying, right?
[alert style=”green”]Angel investors and venture capitalists invest in new businesses where they see potential for growth and success. They own about 10-50% stake of the company and provide capital for the startups. You can arrange meetings with angel investors or VCs via Angel Clubs, Open Angel Forums, etc. The only disadvantage is the entire process is a little slow.[/alert]
Many a times customers are willing to provide capital for a business in exchange for customization or discounts at the cost price of products. This is a very good way of acquiring capital. You can offer exciting offers such as free services for a year or so. This in turn brings more investors in the view because the investors have witnessed immense customer support.
Social lending is a new procedure that is slowly gaining approval. Two individuals set their own respective terms and website or any other medium acts as the intermediary. All such loans are unsecured for three years.
Crowdfunding is a nice and innovative method, wherein a large number of people contribute small amount of money to a venture. It doesn’t give away any equity amount and there is no need to return back the money.