8 Quick Ways to Finance Your Small Business

Several start-ups and small businesses were caught off guard during the global economic disruption last year, with the manufacturing sectors being affected the most. As the market stabilizes, such businesses are getting back on track and resuming normal operations.

In such a scenario, launching a new business or sustaining one will require capital investment irrespective of the domain in which it will operate. Appropriate funding will provide a firm with a strong base and help it expand and grow even further. Since securing funding for a business can be challenging, here are 8 quick ways to obtain business finance.

8 ways to acquire instant business finance for SMEs

• Self-financing or bootstrapping

The first option for acquiring entrepreneurial finance for a start-up is bootstrapping or using personal savings to obtain money. It is one of the best methods for first-time investors as later on, they can avail of a credit facility once their business attains stability. Moreover, it prevents the company from going into debt from the very beginning, as repayments can be tricky when generating cash flow.

That said, bootstrapping is very risky, especially if the owner does not possess many assets to draw from. 

• Crowdfunding support

One advantage of the popularity of social networking is the advent of crowdfunding. This involves collecting funds from multiple investors on web-based platforms after detailing the required corpus and its end-use. Investors will see the business proposal and decide to invest in the business if their interests align.

Crowdfunding is similar to other credit facilities and the money raised must be repaid to the lenders.

• Business loan from traditional financial institutions

Most start-ups prioritise traditional financiers to obtain business finances as they are convenient and reliable. Almost every private and public financial institution extends two types of financing, i.e., term loan and working capital loan for start-ups. Once firms estimate how much working capital they need, they can approach such lenders and avail finances for their business.

That said, such traditional lending institutions often have stringent eligibility criteria. Business owners will have to provide documented financial history citing stable operations or audited balance sheets to increase the likeliness of loan approval.

• Small business loans from NBFCs and MFIs

For new companies that do not possess a strong financial history or maintain a credit score, obtaining a loan from traditional institutes is difficult. Non-banking financial corporations (NBFCs) or Micro-finance institutes (MFIs) extend business loans with lenient eligibility criteria without showing a stable financial history.

Meanwhile, leading NBFCs like Bajaj Finserv extend pre-approved offers on products like business loans and credit cards to streamline the funding process. These offers have several advantages, like quick paperless processing, easy documentation, etc. You can check your pre-approved offer using basic information like name and contact details.

• Loans under government schemes

To help combat the impact of economic instability and promote socio-economic growth, the Government of India also launched several loan schemes for start-ups, MSMEs, educated youth, and women entrepreneurs. New businesses can submit their portfolio and apply for these schemes to avail entrepreneurial finance quickly.

Some of these schemes that you can apply for include Startup India, Stand-up India, Pradhan Mantri Mudra Yojana, CGTMSE, Make in India Initiative, Atal Innovation Mission, and Trade Related Entrepreneurship Assistance and Development, among others.

• Peer-to-peer lending

In peer-to-peer lending, lenders directly lend money to borrowers without the involvement of intermediaries. Individuals or investment firms work with companies that show a fast-developing potential and consistent growth record. For start-ups, such lenders make a direct investment into the company, and the business finance can be used to run daily activities and expand operations. 

Although regulated by the RBI, peer-to-peer lending usually comes with higher interest rates than traditional financing institutions and NBFCs.

• Angel investors

Angel investors are people or organizations that invest their own money into potentially high-rewarding businesses. One of the biggest advantages of working with angel investors is that the obtained funds do not need to be repaid. So, even if your company does not start making money right away, you won’t be in a rush to repay debt.

However, the trade-off comes in the manner of an equity stake in your business. Make sure to evaluate your priorities before exploring equity investment.

• Business credit cards

Business credit cards are excellent options to meet short-term financial requirements without going through the hassle of a loan application for every expense. This revolving credit line is extremely beneficial for companies that need their short-term costs met quickly and earn reward points rapidly.

When approaching a lender for business finance, owners should prepare their pitch after thoroughly studying the market traction. This is primarily because lenders consider various factors like records of proven cash flow and growth potential as selection criteria for business loan approval. You can easily get finance for your business as per requirements.