Be it a start-up or a business with years of vintage, entrepreneurs need substantial capital to keep their production afloat. Though availing of business finance has become easier over the years, the existence of too many options often confuses entrepreneurs more than they should. To eliminate such doubts, business owners often become familiar with the loan’s accompanying features and USP.
Top 7 options to finance a business
Here are the 7 most popular ways of raising funds for a business in India –
1. Invoice financing – Supply chain finance or invoice discounting
This alternative means of financing comes in handy for businesses that tend to sell or purchase raw materials on credit. With the help of this funding option, businesses selling products on credit can use unpaid invoices to raise cash from bills financing services at a discounted rate.
On the other hand, buyers purchasing goods on credit may opt for supply chain finance and streamline the production process successfully. Usually, on maturity and as per the agreement, the financier returns the remaining invoice amount after deducting its service charge.
2. Government loan schemes
The government of India has launched several credit schemes for small and micro enterprises to boost their manufacturing prowess. Entrepreneurs who meet the accompanying eligibility criteria of the government loan schemes can benefit from substantial funds at affordable rates.
Some of the most popular government business loan schemes in India include – MSME business loans in 59 minutes, MUDRA loan and Credit Guarantee Fund Scheme for Micro and Small Enterprises.
3. Business loan
A business loan is among the most popular unsecured funding options in India. Qualifying business owners can raise a substantial loan amount of up to Rs.45 lakh and meet requirements like purchasing the latest equipment, expanding production scale, purchasing raw material, etc.
However, the key is to select financiers who extend a high loan amount at nominal interest rates and affordable repayment terms. For instance, leading financial institutions like Bajaj Finserv extend a high loan value at competitive interest rates and are transparent about the additional charges.
Such NBFCs also provide customers with pre-approved offers that simplify the process of availing a loan significantly. The said offers are made available on multiple financial products that include personal loans, business loans, credit cards, etc. Check your pre-approved offer now in a few steps with your name and contact details.
Applicants should ensure that they know about the eligibility criteria and documents required for a business loan to enhance their scope of getting their loan application approved.
4. Investment instruments
Those with in-depth knowledge about the market or underlying assets or sectors may consider investing in stocks, mutual funds or ETFs for the short-term. However, both the selection of investment instrument and asset allocation depends on an investor’s risk profile, investment goal, time horizon, etc.
5. Peer to peer financing
Also known as P2P lending, this alternative source of business finance enables businesses to raise funds from other individuals at lucrative rates. Individuals can raise a loan through this option once a lending portal assesses their application and analyses their risk profile.
6. Gold loan
Individuals can use gold jewellery or physical gold as collateral and raise funds against their value. In this arrangement, the financier charges interest on the sanctioned loan amount and only after the borrowers pay off their dues, they get their deposited gold back. Note that the value of the sanctioned loan amount depends mainly on the market’s prevailing gold price.
Over the years, crowdfunding has emerged as a lucrative means of raising capital to boost small businesses or start-ups. Usually, crowdfunding serves as a quick source of accessing cash. However, to achieve it, businesses often need to adopt a reliable promotional strategy and maintain transparency.
These are some popular ways of accessing business finance in India. Nevertheless, entrepreneurs should compare all the features and limitations of each option before applying for anyone.