According to a report, Finance worth Rs.2,32,594 crore were sanctioned in February 2021 under Pradhan Mantri Mudra Yojana. The scheme extends funds to support small, micro and medium enterprises facing liquidity issues.This data suggests a plausible time for individuals planning to start their small businesses or startups.
However, running a business smoothly requires planning and substantial funds. Depending on Government schemes or personal savings can be insufficient in certain cases. In this regard, novice entrepreneurs can look into the funding options available in the market.
What are the top instant funding options for small businesses?
The common sources of business finance an entrepreneur can check are discussed below. Find all the points below that will help you to know more about business finance.
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Partners or venture capital
Looking for a partner or venture capital firm can be a smart way to arrange funds for small businesses. These strategic partners offer finances against company rights.
A partner can work as an employee in the firm or own a percentage of firm ownership. This can be helpful as a new entrepreneur can gain insights on running a business smoothly.
VC firms will extend a small business loan for the initial stages of a project. They usually invest against equity and end the partnership after gaining acquisition. However, it is essential to read the terms before opting for credit from such ventures.
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Angel Investors
Opting for angel investors or angel financers is a creative way of raising funds for small businesses.
These individuals hold high-net-worth and extend credit to small companies showing potential. Here the dealing is based on ownership equity.
Additionally, angel investors levy simple terms against the credit, making it feasible for small businesses. It is advisable to prepare a business plan before contacting such investors to avoid any scope of rejection.
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Crowdfunding
Crowdfunding is again a lucrative source of business finance. It is a process of receiving small credit from a group of financiers or investors.
An entrepreneur can connect with these investors via social networking platforms or crowdfunding websites. Ideally, an individual needs to pitch his/her products or idea to these investors. This can help in raising substantial credit from high-value finance.
However, these advances are debt or equity-based. It is essential to read the repayment terms before signing a contract.
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Government Schemes
For almost every Indian, government schemes are the common options for financing one’s small business. According to a report, small businesses and MSMEs contribute 30% of India’s GDP.
This is why the government keeps proposing feasible schemes to support the liquidity issues of small, micro and medium businesses. Novice entrepreneurs can check schemes, such as Pradhan Mantri Mudra Yojana, Standup India loan, Credit link capital subsidy, etc.
The Indian Government also extends special schemes for women entrepreneurs against simple terms.
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Peer-to-peer lending
Peer to peer lending is a good option for individuals who aren’t comfortable with intermediaries. Here investors invest in businesses that show potential. A borrower can use the funds to meet their business operations. However, the interest rate levied against this credit is generally high.
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Surplus from savings
Individuals who aren’t comfortable with borrowing funds can opt for surplus from savings. They can save funds to invest in the business proceedings. However, this option can be risky for future endeavours. Additionally, they can sell unused assets to receive immediate funds. Individuals should opt for this option only when they have a financial backup.
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Business loan
Individuals can opt for high-value funding, such as a business loan, to avail funds for their enterprise. The lending institutions levy simple eligibility and documentation against this credit form.
Moreover, borrowers with a healthy score and remarkable credit history can convince lenders to levy affordable interest rates. They also gain better service and customised benefits. For instance, NBFCs such as Bajaj Finserv extend pre-approved offers to credible borrowers. These offers make the application process hassle-free
Such offers are levied on financial products such as business loans, personal loans, etc. Check your pre-approved offer by entering information, such as name and contact details.
These are some smart ways of generating finances both for new and existing small businesses. Additionally, one can check lucrative government schemes like Pradhan Mantri Mudra Yojana to avail loans upto Rs.10 lakh against simple terms.
