How much money do I need to start a business in Japan? How to raise funds for starting a business

Update:2025/5/1

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Starting a business requires a certain amount of start-up capital. Although you do not want to get off to a bad start due to lack of funds, some people may not be able to start a business because they do not know the specific amount of money or how to raise funds. The amount of capital needed to start a business varies greatly depending on whether it is an individual or a corporation, as well as on the type and size of the business.

In this article, we will explain in detail the approximate amount of funds needed to start a business and the realistic financing options available. We will introduce various funding sources, including bank loans, institutional loans, Japan Finance Corporation, and crowdfunding, as well as personal funds, so you can find the best funding method for you and take the first step toward your dream.

To start a business, you need a business plan before you can get funding!

In order to successfully raise funds when starting a business, a business plan must first be prepared. A business plan not only clarifies the objectives and strategies of the business and increases the likelihood of its execution, but it is also an important decision-making tool in attracting business funding and collaborators from financial institutions and investors.

The main items of a business plan that are generally required are as follows

• Business concept (philosophy, vision, business objectives)
• Founders’ background and experience
• Business description and characteristics of services and products offered
• Market environment and competitive analysis
• Sales and marketing strategy
• Information on suppliers and partners
• Management and operational structure (personnel plan)
• Sales forecasts and revenue projections
• Funding methods and use of funds
• Repayment plan (cash Repayment plan (cash flow plan)

How much money do I need to start a business?

According to the “FY2024 Survey of New Business Startups” by the Japan Finance Corporation Research Institute, the average cost of starting a business is approximately 9.85 million yen, and the median is approximately 5.8 million yen. About 40% of the respondents started their businesses with less than 5 million yen, indicating that the overall cost of starting a business tends to be lower than that of starting a new business.
(Source: Japan Finance Corporation Research Institute “2024 Survey of New Business Startups” / https://www.jfc.go.jp/n/findings/pdf/kaigyo_241127_1.pdf)

The costs and procedures required for starting a business differ depending on whether it is a sole proprietorship or a corporation. From this point on, we will explain in detail the guidelines for funds separately for sole proprietorships and corporations.

For sole proprietors

When starting a business as a sole proprietor, a “Notification of Opening or Closing of a Sole Proprietorship” must be submitted to the local tax office within one month of starting the business, and if filing a blue return, an “Application for Approval of Blue Return for Income Tax” must be submitted to the local tax office within two months of starting the business.
(Source: National Tax Agency, “A1-5 Procedures for Notification of Opening and Closing of Individual Businesses”/ https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/annai/04.htm)
(Source: National Tax Agency, “A1-8 Application for Approval of Blue Return for Income Tax (Source: National Tax Agency, “A1-8 Application for approval of blue return for income tax purposes” / https://www.nta.go.jp/taxes/tetsuzuki/shinsei/annai/shinkoku/annai/09.htm)

Although there is no cost for these procedures themselves, the cost of purchasing a computer and printer, business cards, website production, advertising, etc., necessary for the business, is included in the cost. However, certain initial expenses will be incurred, such as the purchase of computers and printers, business cards, website production, and advertising expenses. In addition, you will need to set aside approximately 3-6 months of monthly sales as working capital until your business gets off the ground. One option to reduce initial costs is to use a serviced office.

For corporations

There are various corporate forms, such as limited liability companies and general incorporated associations, but this section focuses on the cost of establishing a corporation as a joint stock company. When incorporating a corporation as a joint stock company, you must first register the corporation at the Legal Affairs Bureau, which will cost approximately 210,000 to 250,000 yen at the time of incorporation. The registration tax is 150,000 yen or 0.7% of the capital, whichever is higher, the fee for certification of the articles of incorporation to be paid to a notary public is approximately 50,000 yen, the fee for revenue stamps is 40,000 yen (not required for electronic articles of incorporation), and the fee for a certified copy of the articles of incorporation is approximately 2,000 yen. In addition, a separate capitalization fee is also required.

After incorporation, in addition to corporate tax, there will be maintenance costs such as social insurance premiums, office rent and utilities, and tax accountant fees. To reduce rent and facility costs, we recommend using a serviced office.

How to raise start-up capital

There are multiple ways to raise the funds needed to start a business, each with different characteristics and precautions. Compare the advantages and disadvantages of each and determine which method is right for you.
Here are seven of the main ways to raise funds for starting a business.

Self-funded

Self-financing can be the entrepreneur’s own savings, retirement funds, or funds obtained from the sale of assets. The advantages of using one’s own funds to cover start-up costs are that there is no interest or security deposit burden, no obligation to repay, no interference by outside capital, and a high degree of freedom in management.

However, there is a limit to the amount of funds that can be prepared with personal funds, and relying too much on personal funds alone may result in a shortage of funds. Therefore, it is necessary to secure sufficient working capital while keeping the initial investment low by using serviced offices.

Borrow from relatives or acquaintances

Borrowing from relatives or acquaintances is a financing method that can be used when financing at financial institutions is difficult. The advantage of this method is that it is relatively easy and quick to raise funds without the strict screening process of financial institutions.

However, vague repayment deadlines or verbal agreements may lead to financial problems later on. In the unlikely event that you are unable to repay the loan, the relationship may break down. When borrowing from a relative or acquaintance, it is also important to draw up a loan agreement that clearly states the repayment terms and interest.

Borrow from a bank, credit union or credit union

Banks, shinkin banks, and credit unions are financial institutions that accept deposits and make loans. Banks operate over a wide area and provide loans on a large scale, while shinkin banks and credit unions are community-based and specialize in loans to relatively small businesses. The advantage of the method of borrowing funds from financial institutions is that there is no direct intervention in the management of the business, and it is easy to improve credit ratings.

However, when receiving a loan from a financial institution, you must have sufficient personal funds, a specific business plan and repayment plan, and pass a rigorous screening process. Because of the interest burden and repayment obligations, it is also difficult to obtain a loan if the company has just been established or if the company has insufficient personal funds.

Use institutional loans

Institutional loans are loan programs provided in cooperation with local governments, financial institutions, and credit guarantee associations. The Credit Guarantee Association guarantees the debt, and this makes it possible for even a start-up business to borrow at a relatively low interest rate and for a long period of time. Some municipalities offer partial subsidies for interest rates and guarantee fees.

On the other hand, it should be noted that it takes about one to three months from the application to the execution of the loan, as the loan must go through the screening process by the local government, financial institution, and credit guarantee association.

Receive a loan from JFC

JFC is a public financial institution wholly owned by the government and provides low-interest loans for startups and small and medium-sized businesses. Representative programs include the “New Business Start-up Support Fund” and “New Business Development Fund” available to businesses that have been in business for less than seven years, and the “Women, Youth/Senior Entrepreneur Support Fund” to support women, young people under 35, and seniors 55 and over starting their own businesses.

JFC’s start-up loans are available on an unsecured and unguaranteed basis if conditions are met. However, the disadvantage is that it takes several weeks from the time of application to the execution of the loan, and interest charges are incurred.

Receive investment from investors or investment companies

An investment from an investor or investment firm is a way to raise capital in exchange for equity. Individual investors, especially those who invest in start-up companies, are called angel investors. Funds that invest in venture companies are called venture capitalists, and their goal is to sell their shares for a profit after the company goes public or increases its value.

Receiving investments from investors or investment companies is beneficial in that there is no obligation to repay the investment, and in addition to raising funds, management advice and human networks can be provided. On the other hand, the disadvantage is that the investor may intervene to a certain extent in the management of the company depending on the investment ratio, thus reducing the degree of management freedom.

Use crowdfunding

Crowdfunding is a method of raising funds in small amounts from a large number of people using the Internet. Specific business ideas or products are publicized on a website, and support is collected from individuals who share the idea.

Crowdfunding is typically a purchase-type method that offers returns (products and services) to supporters, and can be expected to have test marketing and PR effects at the same time as raising funds. On the other hand, the funds may not be received unless the target amount is reached, and caution must be exercised about the risk of imitation associated with the public release of ideas.

Summary

In preparing funds for starting a business, it is important to first formulate a business plan and then clarify the amount of funds appropriate for the business. There are a wide range of funding methods, including self-financing, loans from relatives, loans from financial institutions, institutional loans, use of public institutions, investments from investors, and crowdfunding.

Regardless of the method you choose, the key to success is to have a funding plan and a business plan. With well-planned financing, you can avoid the risk of business stagnation due to lack of funds and get your business off the ground with peace of mind. We also recommend using rented office space to reduce office rent and equipment costs.

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