Deciding on the most suitable source of funding is the most crucial step for the startup.     Numerous sources are available in the market, and the entrepreneur has to select from such     options. Some common sources of funding are stipulated below, and the entrepreneur    can    make a choice from among these: –

  1. BOOTSTRAPPING: The term “bootstrapping” refers to the process of beginning a business using only one’s own personal savings, which may also include monies borrowed or invested from family or friends, in addition to revenue generated from initial sales.

    Businesses that are self-funded do not rely on traditional ways of financing, such as the help of investors, crowdfunding, or bank  loans. Instead, entrepreneurs are expected to establish their businesses using their own personal funds. The best thing about bootstrapping is that it permits proprietors to maintain complete proprietorship of their  enterprise. Investors provide financial backing to a company in return for a designated proportionate share of ownership. By bootstrapping, the proprietors of a venture are able  to retain a portion of the financing. On the contrary, it may involve risk. Self-funded  enterprises may encounter challenges in expanding as they deplete their financial resources over time. This may hinder the ability of a startup to achieve its maximum capabilities.

  2. ANGEL INVESTORS: Angel investors are non-competitive private investors who are inclined to provide startup capital to small enterprises. The investors extend the capital in this manner in exchange for a stake. However, businesses are required to reimburse angel investors for a portion of their profits.Furthermore, they retain the prerogative to oversee and regulate the managerial  procedures of an organisation. One can potentially encounter angel investors through networking. Angel investors provide foundation capital to nascent enterprises in exchange for ownership stakes. They can be part of an entrepreneur’s personal network or a professional investor, offering a one-time initial capital injection or a continuous cash infusion. They typically do not engage in the loan industry but invest in appealing ideas, expecting a return on their investment.
  3. VENTURE CAPITAL: Venture capital is a form of private equity financing offered to small enterprises with the potential for future growth. It is typically provided by investment banks or affluent investors and can include managerial or technical proficiency. Venture capital is typically invested in businesses with significant development potential or rapid expansion.
  4. BUSINESS LOANS: A business term loan is a lumpsum quantity of capital borrowed from financial institutions to support the daily operations of a small business or startup. It is a prevalent form of debt financing characterized by a fixed repayment period and greater interest rates than secured loans (e.g., loans secured by property).
  5. CREDIT CARDS: Similar to a personal credit card, business proprietors are permitted to use a business credit card to make payments for the company. It is often regarded as the optimal method for managing cash flow, disbursing expenditures, and maintaining a record of corporate spending.
  6. CROWDFUNDING: Crowdfunding is a financial fundraising model wherein a multitude of prospective investors contribute funds via a reputable crowdfunding website. It is one of the most economical methods of capital acquisition, in which a number of individuals finance a new business endeavor collectively. Platforms for crowdfunding enable startups to acquire modest investments from a variety of investors, as opposed to relying on a single investment source.
  7. GOVERNMENT GRANTS: Government grants and subsidies are available to entrepreneurs in order to support their business operations. Grants are distributed to various industries or demographic groups. It can also be tailored to businesses that are owned exclusively by women. To maximize the benefit of the grant, business proprietors must comply with its diverse conditions. Additionally, they must understand the eligibility requirements in order to obtain government subsidies.

CONCLUSION: At last, it can be concluded that there are a number of sources for funding startups, but the selection of a suitable source of funding depends on a number of factors. The entrepreneur must go through all the pros and cons before opting for any particular source of funding and must select the most suitable one for his or her startup.