Whether running a small-scale company or a chain of stores, every entrepreneur needs funds infusion during different operational stages. Since most SMEs are bootstrapped, they constantly need funds to cover various venture needs. That is when they get an instant Business Loan to cover their expenses quickly. Whether to meet working capital requirements, invest in office equipment or space, hire a workforce, or anything else, every business operation requires funding influx from time to time.
If you are a young entrepreneur looking for a Business Loan, consider the below options that can help you cater to your specific requirements.
1. Business Loans
Many entrepreneurs take Business Loans to meet various high-value expenditures like expanding business operations, upgrading machinery or equipment, meeting working capital requirements, purchasing raw materials, restocking inventory, making infrastructural changes, hiring a workforce, etc. Reputable lending institutions like Clix Capital offer unsecured Business Loans that do not require pledging collateral against the loan amount. These are hassle-free and convenient business funding options with flexible repayment terms and minimal documentation requirements.
2. Working Capital Loans
Working capital loans are used for financing everyday business operations, such as wages, product development, utility bills, inventory purchases, sales, marketing, and other activities. These are short to medium-term loans many SME owners use to bridge their financial gaps.
For instance, a business might need extra funding during low activity periods for seasonal businesses and short periods between accounts receivable and payable. The structure of a working capital loan consists of the repayment term, interest rate, and amortisation period, determined based on the applicant’s income, financial obligations, and repayment capacity.
3. Loans Against Property
Loans against property are secured loans that give the lending institutions a legal claim against the borrower’s asset. If the borrower defaults on the loan, the lending institution can convert the collateral assets into cash to recover their money. An SME owner can secure a Business Loan against property with different kinds of assets like vehicles, equipment, residential or commercial real estate, accounts receivable, inventory, credit card swipes, etc.
Enquire about the accepted collateral types before applying for a loan according to the NBFC’s policy. The interest rates are lower, and loan amounts are higher than secured loans due to the low risk involved for the lending institutions.
Self-financing is equivalent to personal investments that many business owners use to fund their business operations. These are particularly helpful for start-ups that do not have a business vintage or experience to show their creditworthiness to lending institutions. Besides, even if the business fails, entrepreneurs lose their savings only rather than getting indebted to others. So, self-finance is the best funding option to begin a start-up. As the business grows, they streamline their finances and become eligible to get an instant Business Loan in India.
5. Peer-to-Peer Lending
Peer-to-Peer lending is another common funding option for young entrepreneurs. This method does not involve any third party for funding. Borrowers directly get money from NBFCs and invest it in their businesses. Depending on the relationship, the lending institution may or may not charge an interest rate from the borrower.
6. Machinery Loans
Businesses in the manufacturing sector can avail of machinery loans to purchase or upgrade their machines and equipment. More attuned to fulfilling a company’s mechanical and technological needs, machinery loans provide convenient and quick financial access to fulfil the asset needs.
Many MSME owners take machinery loans to streamline their production processes and increase speed and efficiency. Manufacturing companies also use these loans to fund their faulty equipment repair work or upgrade to modern and latest machinery. A machinery loan from a reputable lending institution ensures that a manufacturing unit suffers no roadblock to its business growth.
7. Angel Investors
Business investments from angel investors are popular funding choices for many ventures at different stages. Generally, these investors work independently or as part of larger syndicates or investment groups.
Unlike Business Loans, business owners do not repay the borrowed amount to the investors and interest rate. Instead, they give a percentage of their equity to the investors. The higher the profit, the bigger the investor’s returns. However, if the business fails, the investors lose their money without claiming anything back. Besides money, angel investors also contribute their expertise and experience to improve the business finances and make it a success.
8. Bank Overdraft Facilities
Business owners with a great relationship with a bank may avail of an overdraft facility to meet their short-term financial needs. A business owner’s credit score and repayment history influence the bank’s decision to extend an overdraft facility to select business owners. Most banks enable the overdraft facility annually. That means the business owner must renew the facility with the financial institution annually.
After getting an overdraft facility, the firm owners get a credit limit up to which they can withdraw money to cover their financial needs. If the overdraft owner does not withdraw, they don’t need to pay any interest. So, it is an extremely accessible facility for companies that need funds to meet their day-to-day operations, like vendor payments and wages.
9. Government Schemes
The Indian government has rolled out various Business Loan schemes to benefit the country’s SMEs and MSMEs. MUDRA Loan, PMMY, Credit Guarantee Fund Trust for SMEs, Make in India, Standup India, TREAD, and Atal Innovation Mission are some lucrative loan schemes for young entrepreneurs in India. They are incredibly beneficial for entrepreneurs, female business owners, and SME owners.
Finding angel investors is often time-consuming and challenging. So, crowdfunding is becoming an increasingly common funding option for young entrepreneurs. The business owners may float their business idea and financial requirements, enabling investors to contribute to its growth through crowdfunding.
When raising funds for a business, young entrepreneurs must understand how each funding option operates and its pros and cons. Overborrowing might lead to debt accumulation, straining the business finances. So, funding seekers must be careful when selecting their financial option, whether they get an instant Business Loan, working capital loan, or another funding method.