How to raise money for a business without a loan

Starting, sustaining and growing a business is in itself a very challenging and vital task if you are an entrepreneur; to start a business requires immense planning, manpower, execution, marketing and finance, which is most important of all, without finance, business is cannot be initiated and other steps are in itself declared nil and void.

In general, if an entrepreneur starts a business, loans from financial institutions are the primary choice if choosing debt funding, but if I tell you that there are a majority of other options available through which you can fulfil your credit requirements, will you get shocked? The reason for this is that loans are typically the best funding option available that entrepreneurs/business owners generally know; keeping this thing in mind, in today’s business module, we’ll be educating readers on “How to raise money for a business without a loan” and also which method is considered best if you are willing to raise money.

Equity Financing

One of the most famous options for raising business funds is equity; on a broader note, there are only two options one is equity, and the other is a loan. It is a method in which entrepreneurs / Business owners generally sell some part of the company and get the money in exchange; it's called an Initial public offering (IPO).

When the company lacks fund or need some amount for expansion, they open the company to the general public, where people invests with the intention of making monetary profits. Those who invest in equity invest in the future of the company, new ideas, technological advancements and every possible thing that brings a return to them.

Crowdfunding

In recent years crowdfunding has gained enormous popularity among business owners, and especially new-age entrepreneurs admire this way of raising funds a lot. In the method of crowdfunding, internet-based platforms are generally used for working capital and other business loans from many individual investors.

Investors who are large in number donate tiny or minimal amounts of money using crowdsourcing, which a firm needs to carry on its operation. When initiating crowdfunding, explain the company in brief in the description of crowdfunding platforms; also, explain your goals along with your plans on how you will achieve it.

(Note: Be realistic; set a relevant plan and be clear with the requirements)

Bootstrapping

Funding your business using your own money is bootstrapping. It is the most viable way to keep things running in a smooth way. In Bootstrapping, entrepreneurs use the available resources without depending on anyone, like using personal savings, starting from a home garage, and using personal equipment etc.

In bootstrapping, one can control every aspect of the business without getting worried about loan repayments or investors' concerns.

Find your Angel Investor

An angel investor is someone who has a high net worth; it can be an individual or an entity. In simple terms, the one who is ready to invest the money in the initial stages of business with the intention to earn more money. In general, they are the ones who have succeeded in their lives and now helping new-age business owners to succeed; they also share business insights and helpful knowledge with the borrowers along with financial requirements and make sure those borrowers achieve their business goals.

Angel investors usually askes for equity in a business, but some also give debt and charge interest on the amount given. You can also consider friends and family members as your angel investor; it will be a far greater option to go for as funds from known ones are easy than taking it from investors.

Peer-to-Peer (P2P) Lending

P2P is another popular way to lend funds using an Internet facility; in this process, the company that needs funds is directly connected with lenders, and in return, investors earn interest on the borrowed amount. P2P lending is famous among startups; interest charged here is generally high; some recognised P2P platforms are Prosper and Lending Club.

Venture capital entities

Venture capitalists are the dominant players in the funding segment of the business sector; it’s a group of high-net-worth individuals who are normally the owners of successful businesses in their respective domains; they normally invest in highly promising businesses that have potential for good returns. Venture capital firms also offer their expertise and work closely with startups, and act as their strategic partner that helps new entrepreneurs in achieving goals and other business milestones in their domains.

Participate in Fundraising contests.

This method may seem difficult to many of us, but there are businesses that have changed their destiny by winning the contest and have taken huge funding by winning these contests. In order to win the contest, one needs to have innovative business ideas, projects that stand different and an impressive pitch. Just win the investor’s confidence, tell your strategies, have a clear vision and must carry enough potential to attract investors.

Sell the Assets you don’t need

If your business is going through a crisis, then selling your assets may be a relevant option for you; sell high-value assets that you think you can recover later.

Suggested Read:

1. MSME Schemes in India

2. Personal loan vs Business loan

Conclusion

Finance has its own significance, especially when it comes to business; no business can get executed without having enough monetary sources. According to the Indian business mentality, most entrepreneurs only consider business loans as their only source to get funding in order to commence their business, but that is not true; in our today’s discussion, we have discussed leading 8 different ways to secure funding apart from loans.

Choose the option among these that best suits your business structure, and do consider the terms and conditions associated with them; also, if choosing the equity option, then don’t think of giving a major part of the company, don’t equate more than 25-30%.

How to raise money for a business without a loan: Frequently Asked Questions

Q.1 What is the fastest way to raise money for the business?

Get Business Loan using OneNDF- the fastest way to raise money for the business.

Q.2 How to get urgent funding?

• Sell your Assets
• Borrow money from friends and families.
• Take Paytm loans
• OneNDF loans
• Take money from the PF account

Q.3 How to crowdfund a business?

• Select the platform
• Get approval from the platform
• Make your pitch
• Get the donation
• End the campaign

Q.4 Is crowdfunding legal in India?

Equity-based crowdfunding is prohibited as per Indian laws, and no bar on donation/reward-based crowdfunding, which is mostly done online.

Q.5 Is there any non-financing option to raise funds?

Government grants