It is a business owner’s responsibility to make sure that all business operations are on track and that all the measures are being taken to boost the overall productivity of the business. This allows a business to operate at its best optimal levels and thereby maximise the profits. However, not many entrepreneurs are able to turn this approach into reality. And the major reason for this is lack of right form of finances.
In this write-up, we have mentioned the best five financing options for a growing business.
If the business owner requires a large sum of money quickly, he can apply for an SME loan. It is the best option for fast and secure funds. Under these small business loans, a business owner can get a large amount of credit at easy to meet eligibility criteria and the most competitive interest rates coupled with a flexible repayment tenure.
If the business owner does not wish to hypothecate any security to avail this facility, he can avail a business loan without security. Thus, SME loans are unsecured business loans, as well. The funds can be used for a wide range of purposes, like buying inventory, expanding the business to a new location (office), and paying off vendors.
A few lenders offer micro business loan with a Flexi loan facility. Under this facility, a business owner can withdraw a part of the loan amount and pay interest only on the used amount. He can withdraw more amount again to meet his business requirements up to the duration of the loan, which is usually a year. In this type of facility, the business owner has the option to pay only the interest part as an EMI. If there is a need for urgent finance, only paying interest can keep the cash outflow low. Overall, the loan has convenient prepayment terms which eventually can lower the financial burden as well.
Venture capital is the best source of income if you have set up a new business venture recently. It is relevant for you if you don’t qualify for a business loan. If your business has good growth potential, it can avail a large amount of funds through venture capital method. However, you need to give up a part of your equity. Furthermore, the venture capitalists take part in all critical decision making with respect to the functioning of the business and the direction where it is heading.
For instance, if you are planning to set up a manufacturing unit that manufactures furniture. You will require a hefty amount of money to set up the unit and get required raw material, such as wood, screws, nails, L brackets, clamps, and hinges. Here, you can get a lump sum amount of money from a venture capitalist to meet the setup cost, which includes from buying the right equipment and machinery to sourcing inventory, from hiring workers to manufacturing furniture. You can also take help of the venture capitalist in hiring the right talent for your business. Venture capitalists usually don’t expect a return on an investment after a few months of business operation.
If you don’t trust the external sources of funding, you can rely on internal sourcing. Bootstrapping is a method of funding one’s financial needs through personal savings and getting the business off the ground. Here, no external credit is involved. As per your wish, you can work as a consultant or opt for a part-time job to raise funds.
Well, this is a slow process but is an effective method where you don’t need an angel investor or venture capitalist. You also don’t lose any part of equity while raising funds for your business.
The other way of bootstrapping is to invite customers and clients to pre-order the products and services. For instance, you want to start a business that offers a ready-to-assemble console, but you don’t have funds to buy raw material. You can ask your customers to pre-order the product, and you can use the funds to manufacture the product. This will help you start your business.
Government Schemes and Loans
If you are starting a small business, i.e. with minimal capital, you can avail an MSME loan from the government. In order to promote and help small business owners in India, the Indian government has launched many schemes to help SMEs like a MUDRA loan. Approximately, there are 50 such government schemes, and these schemes are specially tailored for business owners like you. The schemes include Pradhan Mantri Mudra Yojana (PMMY), 4E (End to End Energy Efficiency), and Stand up India.
With such excellent options for arranging funds for your business, starting a business is not that tough task now. You can set your business goal, review revenue projections, and pick the best source of funding for your needs and business.