Raising capital is a fundamental act of any start-up. Many fintech businesses fail during the first year of operation due to lack of funds. Money is the bloodline of any fintech business. The long, yet exciting journey from idea to profits generating requires a fuel known as capital. That is why, at every stage of the fintech business, it is common to find entrepreneurs asking – How do I finance my start-up? There are several funding options for fintech start-ups that will help you raise funds for your business.
Self-funding is an effective way of financing your fintech business, especially when you are just starting your business. It is not easy to get funding without first demonstrating some plan for potential success. Therefore, during the initial stages of a fintech business, invest from your own savings or get your family and friends to contribute. Self-funding should be considered as a first funding option.
Lately, crowdfunding as a way of funding has gained a lot of popularity. It is like taking a loan, investments or contribution from more than one individual at the same time. This is how crowdfunding operates –Entrepreneur put up a detailed description of their business on a crowdfunding platform. They usually mention the business goals, plans to make a profit and how much funding they need. People always invest in a fintech business they really believe in. Kickstarter, RocketHub and Dreamfunded are some popular crowdfunding platforms.
Get Angel Investment
Angel investors are people with surplus money and a keen interest to invest in start-ups. They normally screen the business proposals before investing. The also provide advice or mentoring alongside capital.
Get Venture Capital
Venture capitals invest in companies that have very big potential. They typically invest in a fintech business against equity and exist where there is an acquisition. Venture capitalists also offer expertise, advice, and act as a litmus test of where the fintech business is heading, assessing the business from the scalability and sustainability point of view.
Get Funding From Fintech Incubators & Accelerators
Early stage fintech businesses can consider accelerator and incubator programs as a funding option. These programs are found in many major cities to assist start-up businesses. The programs usually run for 4-8 months and need time commitment from fintech business owners.
Raise Capital By Winning Contests:
There are many fintech contests that are helping to maximize the opportunities for fintech fund raising. They encourage entrepreneurs with fintech business ideas to start their own business. In such contest, one is required either to prepare a business plan or build a product.
Raise Money via Bank Loan
Ordinarily, banks are the first place that people go when thinking about business capital. The bank offers two types of financing for fintech businesses. One is funding, and the other is working capital. Working Capital loan is the loan needed to run one full cycle of profit generating operations while funding from banks involve the process of sharing the valuation details and the business plan, along with the project report. Sites like Kabbage help an individual to get working capital loan online in less than minutes.