How to Finance Startup Business?

Financing a startup Business is a very difficult task. Because when you start a new Venture, nobody in the market is knowing you. And your Business does not have any record of good past performance or customer feedbacks about your Brand.

I remember that, When I started this Blog (March 2008), Nobody in this world knew “My Journey To Billionaire Club” Brand. And first 1 year was extremely hard to pass. Because when you write something great, nobody in the world is ready to read your content during the first year of your Business.

This is true for any business weather it’s an online business or offline business. And because of this lack of Brand Value, it is very difficult to get start-up fund from the banks and Investors. Here are the few ways to Finance your Startup Business.

01) Personal Savings -

Probably this is the Best. If you have done a job for few years and accumulated some money than you can withdraw your savings and invest in your own Business to start it. Several Entrepreneurs in this world had started their Businesses from their own Savings.

02) Family & Friends -

Here you borrow money from your parents, family members, spouse or friends or ask them to invest in your startup business in exchange of Equity ownership. I started this Blog Business by this way. I raised Rs.40,000 to buy a Compaq Laptop and R.5,000 to buy Books on Personal Finance, Business & Investing to start this Internet Business (This Blog). My Parents gave me Rs.45,000 to start this Business which was my one time Investment behind this Computer. They gave me this money in exchange of 40% Equity Ownership (20% mom & 20% Dad). Still today the parent company of this Blog PATEL EDUCATION PRIVATE LIMITED has 60% Equity ownership of mine, 20% my dad and 20% my mom.

If you don’t want to dilute the ownership interest of your business than you can simply borrow money from family and friends.

03) Angel Investors -

Angel Investors are those who have typically sold their first Business venture. Typically they are first generation Entrepreneurs who are sitting on the huge Cash pile after selling their first venture and now they want to Invest their Capital in new Start-up Businesses for exponential growth of their Capital.

It is very difficult to convince the angel investors.

04) Venture Capitalists/Private Equity Players -

Again these are the Financial Institutions which invests primarily in startup businesses for equity stake for the exponential growth of their Capital.

05) Loans -

You take a Personal loan from banks to finance your startup Business. However, you will need some assets to back this loan.

06) Credit Cards -

This should be the last option to raise money for your startup Business. And if possible, you should avoid this way of raising money anyhow. This is because credit cards will charge you anywhere between 35-50% per year interest rate. And startup Businesses don’t generate any revenue for first few years. So this way of raising money is very costly.

Thus, the above are the various financing options for startup Business…!!!