Whether it is an MSME or a large enterprise, starting a business is quite challenging as it needs high capital investment.
Business funding helps an organisation build a strong foundation besides enabling it to expand. However, in some cases, arranging funds for a new business becomes much more tedious and challenging. Therefore, in order to make the process easier, follow these vital financing techniques mentioned below:
Five best options to raise funds for businesses in India
Following are the top five ways to raise funds for business:
- Finding an angel investor
Individuals with surplus cash who are interested in investing in new start-ups in India are called angel investors. The amount of risk in these financial investments of angel investors is higher than loans provided by financial institutions. This is because angel investors invest in getting higher returns on profit.
India’s most popular Angel investors comprise Indian Angel Network, Mumbai Angels and Hyderabad Angels. Start-up business entrepreneurs can communicate with these investors for finance.
- Looking out for crowdfunding
Crowdfunding is another way of gathering funds from numerous investors through online platforms and social networking sites for business purposes. Besides business, online crowdfunding website gateways raise finances for other purposes like social events, donations, calamity relief funds, etc.
This secures business funding for start-up business entrepreneurs apart from social and cultural events. The prominent crowdfunding platforms comprise Ketto, FuelADream, Kickstarter, Wishberry, Catapooolt, Fundable, Indiegogo, Milaap etc.
- Choosing business loan
A business loan is a major financial tool through which businesses can meet their financial requirements. Business owners running an enterprise can avail of this loan to meet business-related expenses, working capital needs, advancing machinery, purchasing inventory, hiring employees, and more.
If borrowers are new to lending and have no notable financial history or credit score, then it can be difficult to obtain loans from private or public sector financial institutions. However, by communicating with Micro Finance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs), borrowers can get start-up business loans as per requirements without any hassle.
Business loans are offered in two types secured loans and unsecured loans. Unsecured loans are collateral free loans but the lender charges high-interest rates, whereas secured loans need collateral and have lower interest rates. While borrowing, if there is a difficulty, the applicants can check how they can get a collateral-free business loan with ease.
- Availing other credit options
Financial institutions are a highly reliable and hassle-free way to get funds. Lending institutions offer funding in two forms to start-up enterprises. They are term loan and working capital loan. Apart from this, borrowers also have the option of availing credit in other forms like personal loans and loans against property.
Nearly every private or public sector financial institution in India provides these loans. However, the credit amount, rate of interest, and repayment tenor varies from one financial institution to another.
- Opting for peer-to-peer lending
Peer-to-peer lending is a kind of borrowing in which no intermediaries or middlemen are involved in the whole process. P2P or social lending is the process of lending money to enterprises or borrowers without involving financial institutions.
The peer-to-peer business funding method comprises two parties in which the lenders directly send the credit amount to the borrowers. This facilitates the moneylenders to gain comparatively better returns, while borrowers have the advantage of securing funds at a short notice and lower scrutiny.
For instance, financial institutions offer pre-approved facilities that expedite the lending process. They provide these offers on various financial products like personal loans, business loans, and more. Applicants can check their pre-approved offers by inserting details like their names and contact numbers. Running a business is not an easy task. It requires a lot of effort and funds. As a result, applicants must consider the above options to understand how to raise funds for business effortlessly or how it makes business funding easier for a business. Applicants desirous to opt for a funding must follow the important guidelines before applying for a business loan.
