Top 5 tips on how to finance your startup business
Networking has been proven as one of the best sources of generating massive funds as it enables the startups to interact with success-oriented people.
How to finance your startup Business
The growth of startups is changing the present global business environment. According to the Global Startup Ecosystem Report 2019, the size of the global startup economy is worth around $3 trillion. Moreover, the report also highlights that collecting funds and establishing focus have been recognized as the two key foundations for success.
However, the generation of funds for startups has been one of the trickiest challenges faced by entrepreneurs. According to the data by Statistica, 4,228 startup exits occurred worldwide in 2018. In addition, according to For Entrepreneurs, one of the five major reasons for a startup fall has been the failure to generate funds and find sufficient financing.
Top 5 tip to finance business
Therefore, identifying sources of accessible funding for startup businesses is of vital importance. If you struggle with raising financing for your business, here are five pivotal tips on how to generate funding:
- Advancing through bank loan: Nowadays, there are various types of loans particularly to fund the startups such as MUDRA Loan in India for non-farming and non-corporate micro and small enterprises. Startups can utilize this type of line of credit to fund the initial expenses generated by the business. In addition, another scope for funds is to look for the personal line of credit from any financial institution or bank.
- Becoming a part of Startup incubator: Various organizations such as Y Combinator, Techstars, MassChallenge, StartupBootCamp, 500 Startups, SOSV, and Plug and Play are just a few of the famous and robust startup accelerators or incubators, which are associated with different development organizations, universities, and companies. These organizations provide various benefits including resources such as consulting services, workplace facilities, and seed funding. They specialize in navigating fledgling startups through the daunting task of generating funds.
- Funding through Networking: Networking has been proven as one of the best sources of generating massive funds as it enables the startups to interact with success-oriented people. Moreover, such a diverse face to face interactions during networking may help in building connections through online platforms as well. Startups can utilize platforms such as Crowdfunding, and Kickstarter to raise funds for their business by leveraging the power of the crowd.
- Entering into a relationship with a Strategic partner: It is vital to understand the benefits of having a strategic partner for the startup business. It not only provides the scope to generate the required funds but also assists in accelerating the development process of the startup. As has been famously said, two heads are always better than one. According to Powerlinx, more than 80% of the firms highlighted that partnership is an essential element of growth. Moreover, it makes funding easier.
- Optimal utilization of Factoring: This method is a foolproof way of generating funds however it is an expensive one. Funding through factoring is a method wherein a startup can sell or leverage its receivables at a discounted rate for upfront funds. Various firms selling their receivables pay a fee as a share of the total amount. It is considered as one of the strongest alternative methods of financing. The procedure includes lender firms bidding on the bills or invoices of startups, which are sold either in a bundle or individually.
We understand that merely the idea of generating funds for startups can be very daunting. However, by following the aforementioned tips, you can generate easy funds for your startup.
Anna Clarke is the owner of an online writing company 15 Writers. She is a successful entrepreneur with over 20 years’ experience in freelancing, academic essay writing consulting, specializing in Business, Economics, Finance, Marketing, and Management.