An early stage of startup is one of the phases of a business that requires a lot of funding. The funding for startups is one of the initial processes of setting up a business, which includes research of product, market study, development of products, package testing, setting up logistics, warehousing arrangements, setting up the office for staff, buying of equipment, creating office utilities.
All of these processes can drain a lot of money and at this stage, the entrepreneur must have a good solution to handle all expenses. Funding for startups is a challenging process as there are plenty of finance options in the market but very few risk takers who will invest in startups. Because of this reason, a businessman must have a clear goal, plan, pitch and the right support for gathering information and approaching the right investors for raising funds.
Early Funding For Startups
When it comes to raising funding for startups, there are many options but limited ways to get these fundings. Banks, lenders and private financing is always available for huge loans but most banks or private financiers do not loan to small time startups unless they attach a considerable asset to their loan. For a startup, the first few assets may also be rented which means that the loan might need to be personal. For a first time businessman, this could all be very confusing and challenging.
In such instances, asking for support is the best method. A businessman or entrepreneur could rely on information from other experienced businessmen who can guide them financially or there are plenty of online organizations that help businessmen in connecting with the best investors in the market. These online portals have links with some of the best industrialists, angels, capitalists, private lenders and banks. Some portals help businesses in crowdfunding also which is one of the newest ways for a group of people to invest in businesses online.
The initial setup stages include a huge amount that is usually brought in by the owner of the company. This could be their own money or money that is borrowed from their parents, friends and other relatives. Every startup in its early stages requires a lump sum amount that is to be spent in setting up the premises and the basic infrastructure that is required for the business. After this stage of investment, the entrepreneur must now look for funding outside for further requirements of the business.
Fundraising Strategy For Early Investment
Once the initial investment is arranged, there are many other sources that a businessman can reach out for further funding for startups. There are many people both individually and as a group who might be interested in helping an entrepreneur in funding for startup business. Below are some of these sources:
SBA (Small Business Administration)
This is a US based organization that promotes small time businesses by providing them with funds. These loans are much like any banking loans and charge an interest on a routine basis.
Angel Investors are one of the most preferred investors as they help potential businesses to come up by investing in them under some terms that are mutually agreed by both parties. These investors are either big industrialists or top businessmen.
Another popular technique of having many people in the public to invest in the company by borrowing small sums of money through a trusted portal.
Microloans are another type of loans that can be availed from such institutions. These are short term loans that can help entrepreneurs with initial funds for working capital and to meet specific requirements such as buying machinery or leasing an office or factory space.