After the conceptualization of the start-up, one thing that takes on the nerves of many entrepreneurs is the source of finance. The conceptualisation is for free but you need enough finances to transform it into something real. So, here we are discussing different sources of finance for start-ups:
1. Personal Investment
When you’re planning for a start-up, make sure you’re amongst the first investors. You should make the planning accordingly. It can either be with your own cash or you can arrange the finances by keeping collateral on your assets. This is the reflection of how dedicated you are towards your idea and even convince bankers and investors about your project and your commitment to it. Also utilising your own money ensures them that you are ready to put your personal stakes on risk as well.
2. From your known people
This is the money you can lend from your partner, parents, family or friends. This is also known by the term “LOVE MONEY”. Other investors and bankers considered this to be repaid as and when your business increases gradually and thus called it “patient capital”. There are certain things to consider while lending love money which are:
There are good chances that friends and family rarely have much capital
The people you lend money from may want to have the say or equity in your business.
You should not be casual when it comes to a business relationship with your family member or friends. In fact, it is as professional as you would have done with other investors.
They are the people who are generally wealthy individuals or more like the company executives who are retired and are interested in investing in small firms. What makes them one suitable source for finance” their experience in the field and the network of contacts along with technical and managerial know-how of industry working and norms make them the person you are looking for. But with so much on board, they surely want to be amongst the board of directors or absolute assurance of transparency in functioning.
4. Venture capital
There is one thing to keep in mind that venture capital is not for every entrepreneur. Trending business like a technology-driven business, communication industry, IT business houses or the business with high growth potential are the fields where venture capitalists are interested in. The thing to know about venture capitalist is that they take an equity position in the company and you have to split your ownership to an external party. But be sure to look for the investors with the relevant experience and industry knowledge.
5. Business incubators
They can be called as the business accelerators as they allow the startups to share their resources like their premises or their administrative or technic resource. They usually last for a period of 2 or more years. Once the business is set, they usually leave the incubator and start to take the lead on their own. usually, it is for the people who are engaged in sectors like multimedia, information technology, biotechnology and more.