Funding is the backbone of any business. In the case of Micro, Small, and Medium businesses, many times business owners lose opportunities only due to the lack of funds. In India, there are several ways to arrange funds for a business. Here are 11 potential options:
- Bootstrapping: Start with your savings and reinvest profits to fund the business initially.
- Family and Friends: Approach your family members or close friends who may be willing to invest in your business.
- Bank Loans: Apply for business loans from banks or financial institutions. This can be in the form of term loans, working capital loans, or overdraft facilities. Depending on the type of loan or the scheme, it may require collateral and a strong credit history.
- Government Schemes: Explore various government schemes and initiatives that provide financial support to small and medium-sized enterprises (SMEs). For example, Seed Fund for Startups under Startup India, Fund of Funds, Pradhan Mantri Mudra Yojana, PMEGP offers loans to micro-enterprises. In India, state governments also have specific schemes. Explore various government schemes and programs that offer financial assistance, grants, or subsidies to support specific industries or demographics.
- Angel Investors: Approach angel investors who are willing to provide early-stage funding in exchange for equity in your business.
- Venture Capitalists (VCs): Pitch your business to venture capitalists who specialize in funding startups and high-growth businesses.
- Microfinance Institutions: Access funds through microfinance institutions that provide small loans to entrepreneurs, especially those in rural areas or with limited resources.
- P2P Lending or Crowdfunding: Peer-to-peer lending or crowdlending is a form of debt financing wherein borrowers can request a loan from another individual without the need for any financial institutions to act as the intermediary. P2P lending, as a source of financing, has the potential to extend financial inclusion globally. Groups with low credit scores or that lie in the low-income category find P2P lending highly accessible compared to other investment options. Also, the underbanked/unbanked populace and small/micro businesses often face difficulty getting approved with organized credit. This makes P2P lending an attractive option for many.
- Trade Credit: Negotiate favorable terms with suppliers who allow you to delay payment for goods or services, providing you with short-term financing.
- Asset Financing: Use your business assets, such as equipment or machinery, as collateral to secure a loan.
- Non-Banking Financial Companies (NBFCs): Consider approaching NBFCs, which are financial institutions that provide loans and other financial services, but are not traditional banks.
Remember, the availability of these options may vary based on your business’s size, industry, and financial standing. It is essential to assess your specific requirements and seek professional advice to determine the most suitable funding sources for your business. To improve your business profile or credibility, attend free and paid sessions organized by MSME HelpDesk. Connect with other business owners in MSME HelpDesk community groups on Linkedin and Facebook to strengthen your business network.
