How to source funds for your new business

When we are thinking about starting a new business, the first thing comes to our mind is fund. Sourcing funds is not so easy task for the new entrepreneurs. Here we will try to understand about how to source funds for the new business from different sources in detail.

If you have a plan to start a new business, choosing right funds for your business is very important. Even if your business idea is very good and financial planning is also perfect, without the proper source of funding you cannot move further. But now in India, some schemes and options are available for the starting of new business. Few investment avenues, funding schemes and foreign investment options can be helpful sources of funds for your business.

What are the different sources of raising funds

The leading research companies in India have done market researches about the investment firms and companies in India and their studies have proved that in India there are about 43 angel depositor networks, 111 business enterprise capitalist networks and around 37 incubators. Earlier when these facilities were not available, new business people had to visit banks for funding, or to invest the life savings or clear up the fixed assets to raise funds. Borrowing money from friends and relatives was also one of the many options for raising funds. But all these sources were not guaranteed and proper documentation was not done for that. Also these old sources of funding were limited and the sufficient funds were not available for further business growth. This condition was not suitable for newly started business. So if you are planning to start a new business and looking for funds then you need to take a wise decision in initial stage only.

Sourcing funds from friends and relatives

Initially while starting the business, we use our own funds and in most cases the next choice remains the family and friends to raise funds. This type of investment is advantageous if available easily. This type of investments comes with very low or no interest and very easy to arrange and avail. Only few things you need to remember are there is risk factor in every business. You have to be sure about the returning of the amount as the failure may affect the relationship negatively. Even if you are raising funds from friends or relatives, don't forget to do all the paper works properly. The perfect documentation is always better to avoid misunderstandings.

Angel investors

Many individuals or business people show interest in investing in profitable business plans. They demand a very small share in the business as an exchange. This type of investors is called as Angel investors. They can provide a high amount of funds for your business needs. All paper work is done perfectly and the risk factor is very low or not present. This can be a very good source of funding for new entrepreneurs. In India few major angel networks are Indian Angel Network, Mumbai Angels, Pune Tech Angels and Business Angels Network. Generally it is observed that the angel investors in India are interested in investing in the fields like education, mobile technology services, rural health and development and health care modernization. Raising funds for angels is advantageous as you get sufficient time for the payment. For the convenience of the new entrepreneurs Indian Investment Network (IIN) has opened a forum for entrepreneurs to meet investors.

Business Enterprise Capital Firms

Business Enterprisers or Venture capitalists are the firms invest money as starting funds for new business people. Generally they invest the money of their shareholders. They don't ask for the share in the business but they can arrange for a very big amount for your business plan. In India, few well known capital firms are Sequoia Capital, Incubate Capital, Nexus Capitals and DFJ. The only thing you need to remember is, you need to undergo a detail enquiry about your business plan and future profit possibilities from your business. The research says that the sectors like Green Technology, health care and E commerce are funded easily by venture capital firms. These funds are available for medium terms for the new entrepreneurs from the well established business firms.

Small Industries Development Bank

SIDBI, Small Industries Development Bank of India is a financial institution that is intended for the expansion and progress of Micro, small and medium scale enterprises (MSME) in India. New entrepreneurs prefer to raise funds from SIDBI as the institute arrange for the funds as well as the other necessary help like advertising and marketing. They offer you a variety of schemes for your business. They also offer you the help for setting up new projects, expansion of the business, diverting the existing business etc. They also help you to modernize your existing business as per the market demand. The SIDBI will show you the way towards new technology, to improve the quality of your product. All these things will help you to be more efficient for the business competition in the market.

Events for entrepreneurs and investors

Meetings and events are arranged for the convenience of entrepreneurs and the investors. You need to attend these events to meet the investors directly and give them idea about your business plans. You can also meet other entrepreneurs in such events. Techsparks is a great series of events which is arranged in all main cities in India. They give you chance to develop your business without much efforts for raising funds.

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Author: K Mohan07 Jul 2016 Member Level: Platinum   Points : 5

The author submitted a interesting article but after seeing the word the Angel Investors, that forced me to respond here. As far as India goes, there are no such Angel Investors. May be they are existing in other countries. The other day I was watching a show on Colours Infinity channel where in people bring proposals to expand their business in front of probable Angel Investors. But that kind of arrangement is not seen in India. The Indian banks are not that user friendly to the new business proposals nor they give money as loan to the people just citing business expansion. Strong recommendations and push is required in India to secure bank loans. That force the business man to approach micro financiers who are ready to fund the business but with hefty amount of interest. Some are successful to pay back and many end up loosing their hard earned property to the investors as they fail to pay the loans.

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