Published On: Tue, Jun 11th, 2013

Finding Capital for your First BusinessFinding Capital for your First Business

Copy of nechupadom“You have an idea, you have written down the business plan, you have talked your friends and family, but have you found the capital to start your business”. Yes, it is at this point where almost all entrepreneurs stumble. It is a known fact that most entrepreneurs find it difficult to find  capital for their business. Even though one is able to find  the capital and start the business, the going forward will be tough. The customers will be few in the beginning, the cash flow will be meagre. Finding funds emergency transactions will be tougher. Especially for the first time entrepreneurs getting credit will also be very hard.

While angel funding, and other natural sources like family, friends and relatives work for certain people but  for some people it may not work out. After all the confidence which the entrepreneur has about his business plan, may not be shared by the investors. While the entrepreneur looks at the positive aspects, the investor will  primarily look at the risk factors.

Securing  a loan from the bank is one of the obvious options, but it is quite difficult also. Several government agencies promote entrepreneurship and finding a bank loan through them will be a better option. Apparently there will some more hurdles while you are going through the procedures for the first time. For a normal bank loan you will have to get hold of guarantor, provide collaterals and will have to go through many other formalities. All of these  procedures will be difficult for a first time entrepreneur, this is where the government backing is important. The government of India has many programs to support budding entrepreneurs.  The state governments are also actively supporting entrepreneurs.

Financing from family and relatives is a good option, but unless you are among the very lucky, it is also extremely difficult. The primary problem is that they will try to account your inexperience and try to dissuade you even from starting a business. As I have said earlier, unless you are among the lucky few with rich relatives, it is almost impossible to get funded through this source.  It is better to keep this option open once you have started the business for emergency funds.  But there are also examples in the history of so many multinational company started with funds from friends and family.

Angel investors are likely to invest large amount of money to a business, but usually they prefer an experienced businessman with a proven record than a young entrepreneur who does not have any experience. But a young entrepreneur has always a chance to get funded with rather amounts.  The young investor should try for a big amount at first, but try to get small amount in succession.  Ones the investor is confident of your business, he may well bring in more funds.

There are many websites which provided guidelines to get funding from investors. There are several books you can refer too. Be sure that you have a good business plan and cash flow statement before you approach any investor, be very sure about the industry and the competitors, and you have you should be able to answer all questions and should be very confident answering them.

Some of the don’ts while looking for a fund, include using credit card and borrowing from unorganized sector who charges heavy interests. Stay away from these two options as the cost included can break your start-up.

Dr Thomas Nechupadom heads metanoeo,a total transformation/grooming company that has been the by word for grooming and dressing,personality enhancement and social/corporate etiquette for many pageants including Ms South india and Ms Queen of india contest

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Finding Capital for your First BusinessFinding Capital for your First Business