STARTUP FINANCE- SOURCES

Startup finance is the initial infusion of money in the business. The most essential aspect of establishing a startup is to determine the route of funding and convincing the investors to invest in your innovative product or service.

The first thing an entrepreneur should keep in mind is that there is going to be risk. Nothing rewards better than risk. And so it is important to take some risks and speed up the initial operations of the business. The startup can be financed through personal savings, loans, vendor financing, etc. The entrepreneur always has the option to go to the banks but the problem is most of the banks are not interested in investing in startups due to the high amount of risk involved. An entrepreneur needs to have a very strong business plan in order to convince his/her investors.

Following can be listed as sources of Startup finance:

1. Personal Financing : No one trusts your ideas better than you yourself. And also people may start startups after getting a base through mainstream jobs and thus may be in a position  to finance their own startups.

2. Family and friends : An entrepreneur can pitch his/her ideas to members of families and friend cricles in order to raise money for the startup.

3. Microloans : A Microloan is a small loan offered to someone or a group of people in need. Microloans are helpful to entrepreneurs who are just starting out and need extra cash to expand. There are many "Bachat gats", Co-operative societies, money-lending organizations, etc for the entrepreneur to raise finance through microloans by paying a slight higher rate of interest.

4. Vendor financing : Vendor finance is a form of lending in which a company lends money to be used by the borrower to buy the vendor's products or property. Vendor finance is usually in the form of deferred loans from, or shares subscribed by, the vendor. The vendor often takes shares in the borrowing company.

5. Peer-to-peer lending : Peer-to-peer (P2P) lending enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman. Some of the P2P lending platforms are Faircent, OMLP2P, Lendenclub, Finzy, i2ifunding, Cashkumar, Rupeecircle, Lendbox, etc. The amount for borrowings and tenure of the loan vary for P2P companies.

 6. Crowd Funding : Crowdfunding is the use of small amounts of capital from a large number of individuals to finance a new business venture. Crowdfunding makes use of the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together, with the potential to increase entrepreneurship by expanding the pool of investors beyond the traditional circle of owners, relatives and venture capitalists. Kickstarter, Wishberry, Indiegogo, Fueladream, Fundable are few famous platforms for crowdfunding in India.

7. Factoring Accounts Receivables : Accounts receivable financing is an agreement that involves capital principal in relation to a company’s accounts receivables. Accounts receivable are assets equal to the outstanding balances of invoices billed to customers but not yet paid. Accounts receivable financing is typically structured as an asset sale. In this type of agreement, a company sells accounts receivable to a financier. 

The above mentioned are some of the major sources of startup finance and an entrepreneur after studying his/her business model and future estimates should determine the source of the finance as it is one of the most eminent factor in the success of the business.