6 Types of Financial Assistance for Startup Businesses

This type of startup company, which incidentally starts from the bottom, requires financial assistance to carry out business operations. One source of financial assistance that is often reported in the mass media is funding from investors. Apart from these choices, in fact there are several other options to get financial support for startups.

As a startup company that starts with high operational costs and limited income, startups need financial support. Generally, startup founders finance the company's operations in the early stages while looking for investors before the business officially starts. What types of startup funding are available?

Types of Startup Financial Assistance (Startup Funding)

From grants to crowdfunding, startups have the opportunity to get financial support. With the amount of funds lent, for example from investors, startups must grow many times over, acquiring a massive number of consumers in a certain time.

1. Equity Investment

As a new business owner, you may wonder what types of financial assistance are available to help with business operations, even before the business is launched. One option you might consider is an equity investment, which is when an investor provides funds in exchange for a partial ownership interest in your company.

There are a few things to keep in mind if you are considering an equity investment for your start-up business. First, you must have a solid business plan and a good personal and professional track record to attract investors. Second, you should be comfortable with giving up some equity ownership in your company.

You should also be aware that there are different types of equity investors, each with their own goals and interests.

• Venture Capitalist
• Angel investors
• Strategic Investors

Equity investing can be a great way to get the funds you need to start a business. Be sure to do your research and understand the different types of investors before taking any money.

2. Government Assistance or Subsidy

The next source of startup funding is support from the government. Based on the Regulation of the Head of the Creative Economy Agency No. 10 of 2016 concerning Provision of Government Assistance for Initial Funding of Business Initiatives (Startups), the Indonesian government can provide financial support to startups. This type of financial assistance from the government can only be used for the following purposes:

• capital development;
• development of facilities and infrastructure; and/or
• human resource capacity building.

This assistance prioritizes startups that are or have been fostered in Business Incubators or have joined the Creative Economy Agency for Pre-Startup (BEK-UP) program. The Business Incubator itself is an institution engaged in the incubation process for business startups by providing guidance, but not limited to providing facilities and infrastructure. In addition, the Business Incubator also provides consulting services, research to creating business networks.

3. Grants

Several universities in Indonesia provide grants for startups. Apart from universities, several private companies also provide opportunities for business startups to obtain financial support. In addition to funding, training resources are also available to carry out business operations. In addition to funding assistance from within the country, business startups also have the opportunity to receive financial support from foreign institutions.

4. Loan Funds

The next type of startup funding is loan or debt funds. This financial assistance is generally submitted to banks, which do provide special loan programs. Banks will usually lend money to businesses that have been in operation for at least one year and have a good credit history. Interest rates for business loans from banks are usually lower than interest rates for personal loans from banks.

Financial assistance can also be obtained from loans from private investors. Private investors are generally willing to lend money to businesses they think have a good chance of success. Interest rates on loans from private investors are usually higher than bank loan rates.

5. Personal/family/relatives money

For some people with sufficient privileges, startup funding comes from personal pockets. If the funds used are entirely from personal pockets, business pioneers can have more flexibility in managing finances. On the other hand, if the business that is started is not lucky, the risk of losing large amounts of assets needs to be taken into account.

In addition, startup funding can also be obtained from family or relatives. This fund is in the form of a loan that must be paid at a later date, when the business started has made a profit. If building a startup is based on cooperation and relatives or family always help, but in the form of profit sharing, pay attention to binding legalities to reduce conflicts in the future.

6. Crowdfunding (fundraising)

Fundraising is a fairly common source of funding for social activities. However, it is not impossible for startups to obtain financial assistance from this funding source.

There are two main types of fundraising, which are rewards and equity based. In reward-based crowdfunding, interested people provide funds for a project in exchange for some kind of reward, such as a product or service. In contrast to equity-based fundraising, people investing money will be rewarded with equity (ownership share).

Funding is the initial capital so that the business can run according to plan. Each source of financial assistance has its own risks and advantages. Therefore, it is important to consider risk management that may be encountered.