Starting a new business and becoming your own boss is certainly an exciting experience. However, there are many obstacles in the way of starting and growing your business. One of the biggest challenges that most businesses face is related to financing. Cash flow is among the biggest hurdles for many business owners. Over 90% of companies fail due to a lack of funding. However, today getting funds for growing your business is easy. While several financing options are available in India, choosing the best one for your business can be overwhelming. Let’s dive deeper into the best sources for financing your business.
How to finance your business?
Obtaining the necessary cash flow is critical to the growth and success of your business. There are different ways to get funds for your business. Choosing the right one depends on your preferences regarding the company’s ownership and other factors. Here are the best ways to finance and expand your business.
- Business loans
Business loans are indeed one of the best ways to obtain the required capital if you don’t want to give up any ownership. Most financial institutions offer different types of business loans. It is crucial to learn about your financing needs before opting for one. Some of the most popular loan options include working capital loans, term loans, machinery loans, etc. You can get a business loan at a low-interest rate if you have some collateral to pledge. Using a business loan calculator to weigh the cost of borrowing funds is crucial.
- Venture capital
Venture capital firms always seek profitable businesses that can generate exponential returns. Venture capital financing involves investors providing funds to start-ups and growing businesses in exchange for equity. While venture capital can be a great funding source, securing it can be challenging. Investors look for companies with a strong business plan, an experienced management team, and a clear exit strategy. However, if you have built a business around a unique idea, it can be easy to obtain venture capital funding.
- Angel investors
Like venture capital firms, angel investors also invest in start-ups and small businesses in exchange for equity. Unlike venture capitalists, angel investors typically invest in businesses in the early stages of development. Another significant difference is that most angel investors are high-net-worth individuals who don’t usually pool funds to invest. In addition to financial support, they can also help with mentorship and guidance to grow the business.
- Government funding schemes
MSMEs are the backbone of the Indian economy. Therefore, the Government of India has launched several schemes to support small and medium-sized businesses in the country. You can opt for a government loan scheme for your business after checking the eligibility. It offers several benefits, including lower interest rates, collateral-free loans, and financial assistance for setting up new companies. Some of the most popular funding schemes include the Mudra Yojana, Stand-up India, and the Start-up India scheme. Applying for MSME loans through government schemes is hassle-free.
- Crowdfunding platforms
The popularity of crowdfunding platforms is growing rapidly. Crowdfunding is a relatively new financing option that involves raising funds from a large number of individuals through an online platform. People who relate to your business’s vision and mission can contribute to its success. These platforms can be used to showcase your business idea and attract potential investors. Crowdfunding can be an excellent way to raise funds without giving up the business’s equity. It is also a great way of promoting your business.
- Invoice financing
Most people are unaware of the invoice financing option. Businesses can leverage their unpaid invoices to obtain funds from third-party finance companies. The finance company provides a percentage of the invoice value upfront, and the business receives the rest when the invoice is paid. It can be a great way to access funds quickly without waiting for customers to pay their invoices. It’s also relatively easy to qualify for invoice financing, as it is based on the creditworthiness of the business’s customers rather than the business itself.
- Personal savings
If you are diligent about saving money and have a good amount saved, you can use it to finance your dream project. While investing personal savings in a business can be risky, it can also be an excellent way to start a business without incurring debt. You don’t have to worry about interest payments eating up the revenue of your business. In addition, it offers more control over the company, and you don’t have to oblige third-party limitations.
There are many financing options out there. Take some time to review the different options and choose the one that suits best for your business.