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Fund Raising Tips for Start-Ups in India

The most common problem budding entrepreneurs face is “Paise Nahi Hai Yaar!” – This not only leaves tons of great ideas away from the market, but also discourages visionaries everywhere. 

Have a business plan ready to take the official first step to set up your business but not having enough funds is the worst but most common problem today. Financing a start-up can be challenging. Even if you have a fool-proof plan for your business, the way you secure funding will determine the success of your business. 

According to data compiled by Fintrackr, the total funding raised by Indian start-ups stood close to $38 billion in the last year. The start-up ecosystem in India is thriving currently, and if you’re looking to start your business, now would be a great time to start!

A start-up requires funding for several reasons. One important thing to keep in mind is clarity on why you are looking to raise funds. Having a detailed business plan before approaching investors will help you pitch your business easily. Most start-ups do not have a well-audited plan with good quantitative data backing their operation plans. It is always a hurdle to approach anyone for financing, given the strict lending requirements. 

This is not unachievable – you can create a solid plan that will reflect well on your start-up and take it forward from there. As you gradually start to understand the financial side of running a business, you will also understand your business needs better. This will help you choose from the available financing options in the current environment, especially for start-ups and early-stage businesses. 

To make it simple for you, we have compiled a few quick financing tips that will help you finance your start-up-

Self-Financing

Self-financing is an ideal route to choose when possible. This will give you the freedom to steer your business as you wish. This will save you the time of chasing banks and grants. You can invest your savings to fund just the first few stages and then opt for a loan. The stability and low-risk factors of your pre-established business will attract external funders.

Angel Investors

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Individuals with the ability to invest significant capital are known as Angel Investors. They usually have a keen interest in new businesses, especially ones that personally appeal to them. Great examples of angel investing going right for start-ups include Uber, WhatsApp, and Facebook. Most angel investors look to invest in early-stage start-ups in exchange for an equity ownership interest. 

Crowd-Sourcing Funds

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Crowdfunding is a way to collect funds from multiple investors for your start-up. A new way of quickly acquiring the funds needed for a start-up, crowd-sourcing works, especially if your start-up has a cultural or social cause it aims to address. Once you find a crowdfunding platform from the many options available online, all you will need is to convince the masses to invest in your business. The more transparent the pitch, the more likely it would gain funds smoothly. Many people would be happy to contribute to a business or idea they believe in.

Short-Term Credit Cards

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If your start-up has not reached scalable growth levels and is at the baby stage, a short-term credit card is for you! It is the easiest way to have access to and build a line of credit. As you use the credit card for your start-up, you can, later on, use the details to prove the start-up’s creditworthiness. Remember to pay the bills on time to avoid debt or added interest rates from penalties. Banks and other external funding sources would gauge the stability of investing in your start-up by looking at your active credit history, card repayments, and card usage.  

Peer-to-Peer Lending

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Peer-to-Peer Lending is a great way to remove the middle institutions and bureaucracy entirely. As a lender, one receives interest and gets their money back once the loan is repaid. Some platforms have verified borrowers so that investors can verify their details before lending them money. The borrower will have the advantage of lower interest rates, less impact on credit score, more flexibility, and more room to obtain loans from more formal institutions. 

Government Grants

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In India, entrepreneurs are encouraged and assisted via government grants that can help with funding start-ups. The Government of India has, in the last decade, been very encouraging to start-ups through the introduction of several financial schemes and grants. Take for instance the SAMRIDH scheme. The ‘Start-up India Seed Fund’ has INR 1,000 crores devoted to helping start-ups and supporting ideas from aspiring entrepreneurs. The government is taking important measures to ensure that start-ups are not financially limited. 

Of course, all these ways of raising finance for business have their own set of advantages and disadvantages, as with everything else in the world. A little research will help you identify what your business needs financially. Having a detailed business plan, seeking advice from experienced investors, the right networking strategies and always maintaining a good credit score will go a long way. Your start-up will be irresistible to eager investors and banks looking to join along with the journey of your brilliant start-up! 

Do you own a start-up or would like to start one? Visit oahfeo.com
to work with like-minded people, share ideas, and network! Check out the daily and monthly plans as well!

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