5 Best Financing Options for Small Businesses in India

For any upcoming small business, finance is of key significance to succeed and survive, whether in India or worldwide. It’s not easy to raise money regularly and efficiently.

However, it does not have to be among the most difficult tasks. Financial institutions have traditionally been the first and the most desired source of capital. Although, they need not be the only available option.

An initial steady push is necessary for an organisation to get to a revenue generation stage and, subsequently, a profit-making stage. Money is the driving force behind this push. This is the case for a new company that just started or a small business trying to expand.

Here are five great financing options by which small businesses in India can raise money smartly:

While you can still choose to get funds from financial institutions like banks and NBFCs, the digital economy calls for every entrepreneur to think beyond the traditional route. You will find that the below options tend to be quicker, more convenient and generally require less documentation. What’s more, some of them act like collateral free loans.

1) Angel Investors: Certain high net individuals follow market trends in various sectors and are keen to invest their personal wealth in businesses starting up there. These persons are known as angel investors. They usually have some kind of interest in the business, a willingness to start the initiative and, of course, investing power. They may or may not wish to hold a stake of equity in the business. A small start-up would do well to draw up a comprehensive business plan before approaching any potential angel investor.

2) Crowdfunding: This has already become a popular and competitive financing option. Start-ups, in particular, find that crowdfunding is easily accessible, and hence, is being increasingly chosen as the preferred mode of finance. The meaning of crowdfunding is quite literal – convincing people (a crowd) to invest (fund) in your business idea on a crowdfunding platform. The idea should seem potential, and investors may want to see some returns on their investment before they commit. Unlike any collateral free loans to MSME, this type of funding doesn’t need to be paid back.

3) Venture Capitalists: If you find a venture capitalist interested in your small business, you’ve struck gold. A venture capitalist offers not just their money but their guidance and mentorship, too, provided they see potential and scalability in your business. They are bound to exercise some control and will need accountability.

4) Non-banking Financiers: As a small business owner in India, you will be glad to know that there are plenty of NBFCs and fintech companies that offer collateral-free loans for your business. You can get a high sanction by submitting just a few documents. These loans usually come with a long repayment tenor making it easy to repay in affordable EMIs. One of the leading NBFCs, Bajaj Finserv, provides collateral-free loans with minimal paperwork and quick disbursal.

This NBFC also provides pre-approved offers on its financial products to expedite the loan processing time.

5) Bootstrapping: Although bootstrapping is more popular among start-ups, existing small businesses also may benefit from this mode of financing. When a small business is looking to expand or scale-up, it needs capital. Bootstrapping, in simple words, means investing your personal funds into the business, or at best, borrowing from family or friends at very low-interest rates. If you only need a relatively small amount of money, this can be a suitable option.

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