According to a recent study, 94% of startups fail during their first year. Lack of funding is the most common reason for these failures. Businesses cannot function without money. A business idea requires capital before it can become a cash-generating enterprise. The first question entrepreneurs ask themselves at every stage of their business is: 

"How to get funding for a business startup?"

When you need funding will depend on the nature and type of your business. After you realize you need to raise funds, the following list will provide you with different funding sources.

You can raise capital for your business by using 5 different types of financing in the guide below. Businesses from other countries can also obtain financing; there are financing options available for Indian businesses.

Your family and friends

The classic way to start a business is to borrow money from friends and family. 

Your family and friends often believe in your dream even though you may have a hard time convincing investors and banks. You may have an easier time getting funding. Even if you are taking the money as a loan, it's a smart idea to get legal advice before borrowing money from friends and family.

Negative aspects? It's easy to mess up relationships with friends and family when you borrow money. Think twice before borrowing money.

Small Business Loans

Banks historically have been reluctant to give money to small companies, but some banks offer small businesses loans specifically. Qualifying is not always easy. Alternate lending companies may be better equipped to assist you with the start-up of your business.

What are the downsides? There are some predatory lending companies. Don't sign on the dotted line before you know who is lending you money.

Crowdfunding

If your idea is innovative and you are adept at using social media, crowdfunding might be a good choice. The crowdfunding sites Kickstarter and Indiegogo have helped a number of businesses raise funding when they were just getting started.

Is there a downside to this? Due to the fierce competition in crowdfunding, you need a lot of buzzes to cut through the background noise. Furthermore, you could overextend yourself and upset your supporters, creating a lot of friction before your company even launches.

Loans from banks

Start-up enterprises prioritize banks as a source of capital because they find them more convenient and reliable. Term loans and working capital loans are two ways in which banks provide funding to start-ups. There are almost no banks in India that do not offer business loans for start-ups. While interest rates, loan amounts, and repayment terms will vary from bank to bank, they will all be based on factors related to the bank.

Bootstrapping

Personal preference leads us to choose this option. Starting your own business with bootstraps can be a wise idea for anyone. Bootstrapping entails starting a business using your own funds and resources instead of being dependent on outside investors. Keeping ownership of your startup and becoming self-sufficient is a smart way to maintain control. There are, however, some cons to bootstrapping. A business cannot scale on bootstrapped funds, and if your company becomes bankrupt, the money you put into it disappears.