The Most Common Funding Types for Young Startups
A lot of individuals who are all youngsters completing college studies recently would often like to start a new business in any field. The young startups of new businesses usually require at least minimum investments in order to purchase basic things for successful starting and running your business.
|S.No||Facts about Startups in India||Details Information|
|1||India Ranks in Startups||Third|
|2||Estimated Number of Startup in India||Around 4200 – 4400|
|3||Estimated Number of Startup in UK||4500-5000|
|4||Estimated Number of Startup in US||47,000-48,000|
|5||Average valuation of Startups||$2.5 to $2.7 Million|
|6||Number of Startups born every day||3 to 4|
There are various types of funding available for the youngsters to start a new business. Such funding types could be very supportive for the need of their capital investments related to starting a new business. With the several types of funding options, the young entrepreneurs should need to review each and every type in order to pick a right choice.
Most common funding types for early startups:
The following funding types are most probably used by the various new entrepreneurs to get fund for their early stage investments in the business.
- Revenue – The best and general source of financing for the new business usually comes in the form of the revenue from the same business itself. When it comes to the revenue funding, the startup usually offers some product or service, get money for that and use that return money to use as the fund for further processes. This type of financing could be described by the various terms such as self funding, internal financing and sometimes bootstrapping. This technique usually helps every entrepreneur to focus on the execution and also build footing without any interference from outside. This type of funding is also beneficial to avoid dilution and also yielding more amounts of profit margins.
- Debt – Issuing debt most probably involves an exchange of something for the commitment. It can be available implicitly or explicitly for the new entrepreneurs for getting initial investment for their young startups. In most of the cases, this responsibility or commitment takes a particular form of loan which will simply transfer the funds in exchange for the commitment to repay the funds over the specific period of time. The loans from the banking sector or any other private lending companies usually include a certain assurance in the form of collateral which are assets of the individuals or a company. For the specific period of repayment time, the loan will include underlying interest rates for the whole period until the entrepreneurs repays the entire loan amount.
- Equity – It is the most general form of funding used by the various numbers of the young entrepreneurs for their early startups. The equity funding is basically the claim or stake in the venture. This kind of claims or stakes can actually exist implicitly or explicitly for the young entrepreneurs to get the best funds for their initial investments. In the legal manner, each and every start up by the young business persons exists as the corporation which comes into being via the creation of the equity funds. It means that the businessmen will get their initial stake or fund in your own firm.
- Grants – Grants is another popular type of the funding for the young startups. This sort of funding usually involves an exchange of something for getting an impact. It might be money, assets, services or any products to get the funds for your investments. The major difference of the grants from the debt or equity is that the exchange of something will not result in claiming on the assets of the specific company or an obligation which if left unexpected results in the claims on the assets or any other collateral. The grants funding method can expect enough accountability for funding your firm. Everyone has to understand that these grants are not actually free money but it could be harder to get than the debt and equity funding for your young startups.
Some other popular funding methods:
Along with the above mentioned types of funding for your new businesses, the following are also the most commonly used funding types by several new business entrepreneurs.
- Crowd funding – It is basically one of the newest ways of funding for your new business which is recently started in your region. There are so many online platforms available where the young entrepreneurs can able to create their crowd funding campaigns to get enough funds for your business. If you don’t know about this type of funding earlier, you just learn everything about the crowd funding and it works better for all types of businesses. Anyone can able to contribute money through helping a business which has better space and belief among the several people. The business persons should need to put detailed information of her or his business on such crowd funding online platforms in order to meet the goals of your business. By this way, you can get better financial source from the various parts to start and develop your new venture.
- Small business loan – Whenever you have a plan to start a new business and want to become a successful entrepreneur in the specific field, you just have to get the small business loan from bank or any other lending company. It is a very nice and suitable solution in all types of situations. In order to get the ownership of specific business and giving enough amounts of product or services to your customers, capital funding is very much important for all. Through these small business loans, everyone will get better investment fund from the banks or lenders for their young startups. There are no risks in getting a small business loan for the first time business persons. It is always recommended trying the alternative choice of loans from the different lenders for picking the best one for your financial needs.
- Credit cards – When the new business persons have an excellent credit history with the higher credit scores, it is always better using your credit cards for getting fund for your young startup of the business. There are several types of credit cards especially designed for the entrepreneurs to get quick funding options from the banks. It is totally a risk free option as compared to all other types of funding options available for the business startups. Getting funds using the credit cards will be highly beneficial to obtain the full ownership and full control of your new company to bring it to the most successful position among the majority of the competitive companies. Even though it is a less popular option of funding for the startup of new businesses, everyone is recommended using this type when you require only lesser amount of your initial business investments.
More funding options for young entrepreneurs:
- Friends and family – All the new business entrepreneurs are recommended tapping your inner circle like family members and friends before expanding your commercial horizons. As the professional investors, you should need to ask your family and one or more friends for the enough fund to startup your business without any interruption. It could definitely be the best type of fund getting from the persons who trust you.
- Bartering – Exchanging of services or goods as the substitute for the money will really be a great way to get enough amounts for your commercial startups. This specific technique will usually work with the engineering, accounting and legal services. Those who are all trying to get the fund for your business investments, you should need to make use of the best bartering techniques in an effective manner.
- Commit to the major customers – Some of the customers in your venture would be willing to get participation in your commercial development and they are ready to spend money for manufacturing products or expanding your services. Everyone is suggested using such major customers to control your overall process with the enough funding. Whether you have small, medium or large scale companies, getting some funds from the customers for investing in the new projects could be a great choice for the best business development.
- Forming a partnership – If the individuals can’t able to bear the entire investment of your business, you can form a partnership to get some percentage of amounts from your partners for the business startups. First, you have to find the trusted and interested people who are all willing to invest in your business along with you. During the partnership, it is always better having proper documentation to clearly mention the amount of investment from each and every partner to avoid the further issues in future. This sort of funding type will be great to get more money for your business startups and development.
No matter whether the young entrepreneurs are choosing which type of funding methods as mentioned above. All of these recommended funding methods are really the best, satisfied, suitable and safe decisions for the persons who would like to involve themselves in the new business. These funding methods usually involves in both long term and short term costs and also benefits according to the type and field of business you have selected. Everyone can get enough funds for your business startups and developments from all these recommended funding methods.
With the boost of startups in India, in nearby future, experts believe that India would overcome the United Kingdom. Current NDA government takes various initiatives to boost Indian youths into entrepreneurship, by offering various offers and schemes