India continues to prosper as the start-up hub at a global level with a 108% growth in the total funding from 2 billion USD to 4.2 billion USD (from 2017 to 2018). Approximately more than 1200 start-ups emerged in 2018 alone that raised the total number of such companies to 7200. The sector receives multiple boosts from various Government start up business loans like Start Up India Loan.
However, there remains a need of significant funding to ensure the smooth functioning of businesses in their seed stage considering that approximately 94% of the trades fail during the first years of their operation. Irrespective of the genre of trade, each business requires financing that would help them.
- Meet their capital requirement
- Maintain a positive cash flow
- Purchase/lease and install state-of-the-art machinery
- Employ skilled employees
Considering such benefits available for the entrepreneurs, they need to understand the business finance meaning before availing one. Even before approaching such lending options, one must make sure to calculate the required credit amount and check out their repayment capability.
Here are a few of the top funding options that will help acquire capital to expand a start-up business.
1- Crowdfunding
Although considered a preferred option to raise funds in the digital economy, crowdfunding requires perseverance and a compelling pitch. Entrepreneurs use the online crowdfunding platform to advertise and market your small business and makes a business pitch that reflects its potential for growth. Following this, multiple crowd investors arrange for the necessary capital.
2- Business loans
In case of entrepreneurs with a business vintage of more than 3 years, availing Business Loans is the best option, since it requires no collateral, and comes with easy-to-meet eligibility criteria. Such financial assistance comes with multiple borrower-friendly features and a high credit amount of up to Rs. 30 Lakh.
3- Loan against property
In case entrepreneurs are in possession of a property that has a high market value, the best go-to option would be to avail loans against property from leading financial institutions. Such credits fetch a higher loan amount with a low rate of interest. Thus entrepreneurs have the benefit to repay a loan with affordable EMIs without stressing on their monthly budget.
4- Venture capital
In the case of new businesspersons with a business idea that has high prospects, venture capital funds can be easily arranged. Such capitals bring with them the benefit of experience from the investors who ensure the growth and sustainability of the business.
5- Government schemes
The steady growth in the start-up market in India can be attributed to the various Government start up business loans. Following such schemes, the Indian GDP continues to receive a steady boost from the MSME sectors. Some such government schemes include MUDRA Loan Scheme, Stand Up India Scheme, Credit Guarantee Scheme, etc.
6- Franchise loans
A significant number of MSMEs achieve the desired financial growth by becoming franchisees of brands. The Indian franchising industry accounted for almost 4% of India’s GDP in 2017, considering that it provides equal growth opportunities to the upcoming entrepreneurs in tier 1, 2, and 3 cities.
7- Angel Investors
Upcoming entrepreneurs can also attract angel investors who express a keen interest to invest in the emerging business. Such investors, apart from offering a capital, also provide mentoring thanks to their years of experience in a specific industry.
8- Grants and awards
The sanctioned amount received through grants and awards or start up business loans can help the business purchase cheaper equipment, arrange for staff training, etc. It helps them maintain a positive cash flow; however, considering that most grants are for non-profits, they require the business to meet specific mandatory criteria.
Taking into account the numerous options available for funding, it is essential that entrepreneurs understand the business finance meaning before availing one. This can be better understood with a thorough comparison amongst the ones available in the market. Availing the best funding option can have a significant impact on the development of a business.