According to several studies, around 50% of small businesses fail due to a lack of business finance. During the initial business days, a financial push is necessary to reach a stage of profit making and satisfactory revenue generation.
Traditionally financial institutions are the best option when raising capital for business is one’s concern. Whether it’s for a business scale-up or for financing a brand-new start up, there are multiple financing options available in India today.
The top 4 smart business financing options available in India are mentioned as follows:
- Business loan
Similar to its name, business loans are typically offered as debt to provide finance to fulfil one’s business expenses. Be it for funding a start-up or scaling up a business by buying machinery or upgrading technology; a business loan comes handy. In other words, borrowers of business loan can solely use the funds for investing in their business and nothing else.
Business loans from NBFCs are available against low interest rates and reduced EMI payable. Businesses or borrowers should consider this financial option as it offers a substantial amount as a loan minus pledging anything. Additionally, one can avail of multiple benefits of taking a collateral free business loan.
- Trade creditors
Trade creditors refer to the bills that businesses or borrowers need to pay. A trade creditor could be anyone, who thinks that a business can offer good revenue generation and thus invests in it.
As a small business owner, multiple distributors and manufacturers are in association and could be your trade creditor. They can offer small business loans, which the borrower can pay back whilst generating revenue or profit. Furthermore, once businesses build trust with a trade creditor, they can also request further long-term business finance.
- Angel investors
Angel investors are private investors who invest in small businesses in exchange for equity. This financial option is best suited for any business that has surpassed the startup phase.
Choosing an angel investor can help individuals become a successful small business owner as they take a keen interest in the business that they are investing in. Business owners can get direct mentoring and management help from this financial option. In addition, borrowers/businesses don’t have to repay the funds as ownership shares are offered in exchange.
- Venture capitals
Confident businesspersons who envision their business’s long-term growth potential can opt for venture capital as a mode of financing. Under venture capital, one can receive funding for their business in the different stages of evolution. From the initial stage to the scaling up or for opening branches, venture capital is a good financial option.
Venture capital helps to channel financing and add more capital within different sectors of the business. It can further help in increasing the overall valuation of the business. Moreover, borrowers can gain expertise and network from their VC providers, which could offer immense help in marketing and promotion.
Apart from these, most lenders and financial institutions offer pre-approved offers to most of their existing customers. These pre-approved offers are available on different products including business loans, personal loans and similar others. Borrowers can check their pre-approved offers by entering their names and contact details. Pre-approved offers help in simplifying and accelerating the overall loan application process.
Building a business empire is as challenging as it goes, with the initial stage being the most challenging one. However, borrowing for business finance could help ease the situation and offer multiple long-term benefits. It is recommended that borrowers consider the pros and cons before choosing a business loan, venture capital, or any of the other above mentioned options.
The start-up business loan helps to separate the personal wealth like the retirement savings, equity on the home or the amount of money you need to live your life apart from the business finances. In simple words, if we can prepare a start-up loan, it can allow you to have reasonable control of your business without providing any risk to your business.
Having a good one should make sure that loans tend to restrict the cash flow of a business. It happens because it requires a monthly payment that includes the principal and interest amounts. Hence if you miss the loan payment, it can cause irreparable damages to your business organization and personal credit. Hence before you apply for the start-up business loan, you should consider the various business expenses that happen consistently.