US SBA report says, 50% of small businesses fail after five years of operation. While the main reason for failure is the lack of funds. Apart from small business loans, other creative financing options are also available. Innovative financing options are critical for the success of small businesses.
Many SMEs don’t get business loans from banks. Hence, you may need to consider options other than small business loans.
Lets discuss the creative ways to raise funds for small businesses.
8 Smart Ways to Raise Funds for Businesses in 2021
Small Business Loan form NBFCs
If banks reject your application for small business loans, then Non-banking financial corporation’s (NBFCs) can come to your rescue. They provide Small business Loans to SMEs at affordable interest rates.
NBFCs provide easy online business loans. NBFCs like Ziploan also provide business instant loan apps in India for hassle-free and easy processing. Businesses can also get the loan approved in 59 minutes. Working capital can be accessed in less than 48 hours.
Crowdfunding is a boon for small businesses. To get started, a small business needs to present its idea for which they want to receive funds. They can reach out to investors through online lending portals.
It can be reward-based which promises a reward to investors on profit or either debt or equity. Kick starter, Rocket Hub, Fundable, and Fundly are some popular crowdfunding sites among small business owners and the general public.
Venture capitalists invest in a small business that shows a high potential for growth. Most of the venture capitalists request a combination of equity and debt financing. The top VC firms are Accel, Benchmark, Index Ventures, Sequoia Capital, Founders Fund, and GGV capital.
As a small business, you are associated with many manufacturers and distributors. They can provide you with short-term small business loans. They can be convinced to not charge you for their services until you make profits. Once you pay your trade creditors and earn their trust, you can ask for longer small business loans. You can convince them for easier payment terms by showing your potential.
Angel Investors have surplus money and are keen to provide msme loans to profitable ventures. Make a promising proposal to them. If they are glued up to your planning they can also offer to mentor apart from a business loan. They prefer to take more risks in investing for higher returns. Indian Angel Network, Mumbai Angels, and Hyderabad Angles are some top investors providing easy business loans.
Business Incubators and Accelerators
If your business is in the early stage, consider an Incubator and Accelerator. These are the programs that assist small businesses with loans, training, operations and nurturing. These programs normally run for 4-8 months. In India, there are various companies that do provide assistance to small companies.
Many contests are held worldwide to encourage entrepreneurs to set up their business. You need to make a captivating project in order to increase your chances to win. Some popular start-up contests in India are NASSCOM’s 10000 startups, Microsoft BizSparks and Lets Ignite. You can visit their websites to find out when they held the contests.
Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA) provide Rs. 10 Lak mudra loan to small businesses. You need to submit your business plan and once approves, the business loan gets sanctioned. Government programs like Kerala state self-entrepreneur development mission, Maharashtra centre for entrepreneurship development, and Rajasthan Start-up Fest also encourage small businesses.
Frequently Asked Questions
Small business loans are the best way to fund your business. Many banks and non-banking finance corporations provide easy online business loans. You may also opt for crowd funding and Venture capital to get funds.
Government grants like MUDRA scheme are the best way to get free or cheap money to start a business. A promising proposal can create higher chances of getting a government grant.
You need to be confident about your business. Prepare a well-crafted business plan that can show your real potential. You must research about the investors before contacting them for small business loans.
Many state or local governments offer small business loans. Check with your local or state government for grant opportunities.
The best sources of finance for businesses are business loans, equity, debt, debentures, venture funding, and term loans.
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