In a recent survey, it has been found that the SME sector contributes nearly 80% to the industrial ecosystem, helping India become a $5 trillion economy.
Even though the data makes it evident that the industry has grown exponentially over the years, a lack of funding remains a major challenge for small business owners. Thanks to unsecured credit facilities like a business loan in India and other Government-backed schemes, most of them are able to cope with these issues.
5 best fund-raising options to grow small-scale businesses in India
From skill development of workforce to business expansion, small and medium enterprises need substantial funds. Every SME needs a solid financial plan, and it is essential to maintain a balance between present liabilities and assets; otherwise, it is inevitable to face a working capital deficit.
Even though small business loans and other financing options are easily accessible these days, individuals should also know all the intricacies to make the most of their benefits.
1. Crowdfunding
This funding option has become immensely popular over the years due to its assistance in marketing the product or business besides financing. To opt for this one, individuals need to find an ideal crowdfunding platform and put up details regarding his/her business, future goals and vision, etc. They also need to mention how much funding their business requires to meet all these goals.
2. Government schemes
As mentioned earlier, the Central Government has launched several financing options and schemes solely for the SMEs of India. Schemes like Pradhan Mantri Mudra Yojana are easily accessible through commercial financial institutions, NBFCs, etc. Under PPMY, depending on the development stage a business belongs to, individuals can obtain loans from Rs.50,000 to Rs.10 lakh at affordable business loan interest rates.
One of the best aspects of this scheme is that borrowers will not be required to pledge anything as collateral to obtain funds.
3. Angel investing
Angel investors mainly look for businesses with high growth potential and invest in them to share the profit in the future. The return on their investment is collected after a specific point of time. However, business owners need to make sure that they have a solid business plan to present to angel investors so that they find this investment worthwhile.
To opt for this financial assistance, one might have to offer a share of ownership in the business. And, on the basis of the investment type, angel investors can choose between one-time monetary backup and continuous support through various processes. Note that it is equally important to have a clear idea about how much working capital your business needs before approaching the investors so that you can plan your finances better.
4. Venture capitalists
Small business owners who do not want to face the burden of equated monthly installments and need an alternative for a business loan in India can go for this financing option. Apart from providing financial backup, venture capitalists also help young entrepreneurs with business strategies and advice. Here too, one needs a proper business plan that they can pitch to convince venture capitalists to invest in their business.
However, this funding option is much more suitable for those businesses which have already shown some traction and are beyond the startup phase. Remember that VCs generally look for ROI within 3 to 5 years, which is why business owners need to keep focusing on the profit part after availing funds from them.
5. Online lending
This can be considered one of the effective and reliable ways to obtain a sizeable amount to support an entrepreneur’s business venture. The easy access to internet facilities has enabled small business owners to submit the loan application, complete the documentation process, etc., online.
Even though the approval and fund disbursal procedure does not take that long, entrepreneurs find the business loan interest rates comparatively higher than other loan variants. However, a high credit score of 685 or above and access to attractive offers can solve this problem.
Most of the reputed lending institutions, such as Bajaj Finserv have introduced pre-approved offers to make financing hassle-free. These offers are available on multiple financial products like business loans, personal loans, credit cards, etc. To make additional savings on your loan, make sure to check your pre-approved offer by submitting your name and contact details.
Apart from a business loan in India, top non-banking financial companies (NBFCs) offer different collateral-free credit facilities which can be easily availed online. However, applicants may need to meet certain eligibility parameters for that in order to obtain a huge amount. And if they want to get themself involved in the repayment process, it is better to choose other funding options from the list mentioned above.Â
Related Post
The Best Software Development Company India
What Struggles do Small Business Owners Encounter in Marketing?
