Did you know that, according to a report from Evoma, there are approximately 42.50 million small or medium enterprises (SMEs) in India, unregistered and registered? Clearly, small businesses are popular, especially after the pandemic when people are exploring out-of-the-box ways to earn. However, gathering sufficient cash to start or even continue the business is a common problem since such companies lack the capacity, financial records, or awareness to access traditional loans.
So, why not be creative? Here are some innovative solutions on how to raise funds for small businesses:
Crowdfunding
Businesses are all about word-of-mouth, aren’t they? For smaller companies, this creates a significant advantage for gaining funds through crowdfunding. Also called peer-to-peer lending, this is where you can pitch your business idea online and reach out to thousands of people to provide you with funds.
In India, crowdfunding sites like Kickstarter, Indiegogo, Wishberry, FuelADream, etc., are quite popular. Donors offering money can also receive rewards, which further incentivize them to help raise funding.
Trade Creditors
Being a smaller business, you are most likely associated with some distributors and manufacturers. You can request them to give you a short-term business loan, in which their services won’t cost you until your company makes profits or its rolling target is met. Once you repay them on time, you can earn their trust and ask for further financing if needed.
Lending Schemes for Small Businesses
While the usual financing is not available, several lenders now offer loans for small businesses. These are provided as a single line of credit for funding companies’ urgent financial needs. Moreover, such schemes usually have business loan eligibility, EMI, tenure, and other favourable terms for small-scale enterprises.
This can be a pretty useful alternative compared to other traditional means of finance too.
Government Programmes
Other than lending institutions, the Indian Government has launched numerous programmes to help small enterprises get the capital they need. One of the most prominent ones is MUDRA (Micro Units Development and Refinance Agency), which supports smaller and micro-business companies. Through this, you can avail of financing depending on the capital you require, along with an affordable payment option.
Apart from MUDRA, the Government of India has several other programmes that help in getting businesses the necessary capital. They are:
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
This is a scheme that empowers businesses to avail of MSME loans through collateral-free credit.
- Prime Minister’s Employment Generation Programme (PMEGP)
Under this scheme, the loan amount limits vary depending on the type of industry your business belongs to.
Pitching to Angel Investors
Another creative way is to pitch your business ideas to angel investors. These individuals usually have surplus cash and invest in profitable companies, be it small or medium, with affordable loans. Such investors also prefer more risk for higher returns, and hence, if your proposal is compelling enough, they’ll be on board. Mumbai Angels, Hyderabad Angels, and Indian Angel Network are some of the country’s top angel investors.
Venture Capitalists
If you are a new business with an innovative growth model, then venture capitalists might be a good choice for you to explore. VCs typically invest in startups that show a lot of promise in the years to come. As they make a substantial investment, they also look forward to a higher chunk of your equity. Some of the prominent VCs in India include Accel India, Sequoia Capital India, and Kae Capital.
MSME Loan
Yet another creative way for you to avail of capital is through an MSME loan. There is a widespread presence of the MSME industry in the country. Because of this, governments and private players seek to help businesses in the space grow by financing small loans. An MSME business loan is an unsecured loan issued by means of certain categories. These categories include the investment made by the company and the turnover that they make as well.
Choose Tata Capital for a Friendly Financial Helping Hand
Whether it be an MSME business loan or a term loan that you decide on, you need a company with a steady means to provide you with that capital. And Tata Capital is here to bring you the best-in-class financing. As a small company, if you need short or long-term business finance, we’ve got it as well. Our small business finance offerings provide higher eligibility terms, no-collateral funding, flexible tenures, and attractive interest rates. You can even use our business loan EMI calculator to check the monthly installment and interest payable accordingly!
Reach out to us today to know more.
15 November 2024
4 mins read
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