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6 Steps To Find Sources Of Business Finance For Your New Startup

25Aug2020
6 Steps To Find Sources Of Business Finance For Your New Startup
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Looking for sources of business finance? In this article, we list some steps you need to take to finance your new business venture and launch your startup.

Starting a business is an exciting milestone that can bring countless rewards. Running a company allows you to have control over your working life and reap the financial rewards of your hard work.

That said, starting a business is rarely cheap and it’s not easy to finance a new business on your own. You’re likely to have various startup costs, along with ongoing expenses. This may include office rental fees, employee salaries, equipment, stock and more.

If you’ve decided to take the leap and start your own company, then you need to consider how you’re going to fund a new business. There a number of ways to finance business in India, but choosing the right sources of business finance requires clarity and discernment.

6 Steps To Find Sources Of Business Finance

Thanks to the proliferation of SME business finance choices, new startups have several options when it comes to sources of business finance. Here are six steps to help you find sources of finance to start a business.

Step #1: Calculate startup costs

The first step to getting finance to start a business is to calculate the startup costs. Preparation and planning is key to a successful business.

Having a clear idea of your business expenses will help you launch your business with confidence and manage your finances efficiently. Calculating your startup costs will also help you make accurate financial forecasts, secure loans, and attract investors.

Your startup expenses will depend on your business type and operations. For instance, your startup costs are likely to be low or practically non-existent if you’re running an online business without investment from home.

Some common startup costs you should consider include office space, equipment and supplies, advertising and marketing, utilities, legal fees, insurance, and staff payroll.

Once you’ve made a list of expenses, you’ll need to calculate how much each item will cost and work out how much you will be paying your employees each month.

You should then be able to use this information to calculate your one-time startup costs and your ongoing business expenses before you go looking for sources of business finance.

Step #2: Create a financial plan

Once you have a list of all expenses, you need to add them up to work out how much money you are going to need to start your business. In order to get your business funded, your pitch to investors must include a full set of financials to seek funding.

You need to create a financial plan that will support your business’ growth and success, so you must outline your estimated startup costs as well as your ongoing business expenses.

It’s a good idea to create an accurate financial forecast that covers a period of at least six to twelve months. This will help you keep on top of your business finances and manage your accounts efficiently.

Having an official financial plan will also help you estimate profits and convince lenders and investors that your business is a strong investment.

Most new business owners have never created a financial plan before, and if that’s the case with you, it may be a good idea to get business coaching on how to write a financial plan before you start looking for sources of business finance.

Step #3: Ask your family and friends to invest

You can also approach your family and friends to see if they would be willing to invest in your business idea and provide funding for your startup.

One of the main advantages of borrowing money from your family and friends is that you will have greater flexibility when it comes to paying back the loan.

This is of the most popular sources of business finance as your loved ones may lend you money interest-free or at a much lower rate than traditional lenders.

They may also agree to a longer repayment period, which means you’ll have more time to grow your business and profits without the stress of making large monthly loan repayments.

However, borrowing money from your family and friends can also have its drawbacks and create a minefield of misunderstandings and complications that could damage your relationships, especially if the terms of the loan are not set clearly.

For that reason, you must always discuss family loans in detail and set out clear expectations for repayments, interest rates and so on. This will help to avoid any arguments or disagreements down the line.

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Step #4: Apply for a government or bank loan

If you want to opt for a business loan for new business in India, especially as a female entrepreneur, you should know that there’s help available in the form of government loans and small business loans for women entrepreneurs.

Applying for a government or bank loan is one of the most common ways to access finance for small business owners because the Indian government has many schemes to provide finance for startups in India, especially for women-owned businesses.

But getting approved for small business loans for new business from the government or bank is not a cakewalk as you’ll have to demonstrate why your startup is a good investment for the lender.

Before making out a loan application, you must create a strong business plan that clearly outlines your objectives and financial forecasts. It is also a good idea to check your credit ratings before applying for a loan.

If your credit score is low, you’re likely to struggle with getting a business loan for a new business. You can boost your credit score by paying off outstanding debt, increasing your credit limit, and negotiating outstanding debt.

Learn all about government loans for women and bank loans for women entrepreneurs so you can get a small business loan for women in India.

Step #5: Consider a short-term loan

If you live in the US, a short-term loan can be a great option for businesses that need to borrow a small amount of money temporarily i.e. for a few months.

The main advantage of short-term loans is that they are typically quicker and easy to obtain when compared to traditional business loans. If you need instant business finance, you could be approved for a small loan and receive funding within hours.

This money can be used to cover necessary business expenses such as equipment, stock, or marketing costs. The capital from a short-term loan could also be used in emergencies or to support your business through a challenging financial period.

Step #6: Find an angel investor

Another popular way to access sources of finance for starting a new business is by finding an angel investor. This is usually a private high net-worth individual (HNI) who provides financial backing for your startup.

In exchange for investing in your startup, the angel investor will usually expect some ownership equity in your business. The capital provided by an angel investor is typically used to help a startup get up and running or to fund an expansion.

If you’re considering angel investors as sources of finance for small business growth, you can connect with a number of investors by attending networking events, such as those conducted by your local chapter of TiE Global or any other entrepreneur forums.

In conclusion, starting a new business can be a highly rewarding and lucrative venture. That said, there’s no doubt that setting up a business is hard work and you’ll require reliable sources of business finance for women entrepreneurs to fund it.

Most businesses need substantial funding and finance for businesses to get things up and running. You must carefully consider the potential costs involved and ensure that you have the right funding and finance for small business to support and grow your new venture.

Learning how to finance a business is not easy. Use the suggestions above to help you plan and finance your business ideas, access the best sources of business finance for new business in India and start working towards your business goals.

About the author:

Priya Florence Shah is the Group Editor at SHEROES and author of Devi2Diva, an emotional self-care book for women.

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