If the business is small, a businessman has options other than traditional bank loans to finance it. Conventional bank loans require a perfect credit score on the borrower's part; hence, only some consider this option. Traditional bank loans have stringent processes and strict requirements, increasing approval time.
Before considering all the options available, you need to ask questions which are relevant to your business:
- When do you need the finance?
- Will you be comfortable sharing your business with equity?
- How much money will you be requiring?
- Do you have a strong business plan?
- How do you intend to generate future cash flows?
- Do you need the expertise of an investor, too?
- What is your credit score?
- What will be the tenure of your loan?
- What kind of business you are in?
- How will you direct the loan towards productive areas?
Top options to get a Shop Loan or Funding
Crowdfunding: This type of funding your business online from a pool of investors. The investors find your project exciting and will pledge their money to fulfill your dreams in return for incentives. Your goals must be achieved within a stipulated period, and your idea must be brought to life.- Angel Investors: Angel investors provide much more than just finance. They supply assistance because they have been an entrepreneur before. They provide business-related guidance, too. You need an excellent business plan and know your business inside out to smoothen the process.
- Factoring: You can opt for factoring even with an abysmal credit rating. Factoring is raising funds by selling your receivables at a discounted price in advance. It is indirectly getting your money today instead of in the future. There is a fee involved or a percentage of the total amount that needs to be paid. There are better options than this, but it is definitely one of them in emergencies.
- Use your Credit Card: Many cards offer zero percent interest rates; therefore, this may be a choice to consider. In other cases, it is not viable if your card charges a very high-interest rate. Even if the interest rate is low, ensure that your credit is within your income, or you'll pay much more than a traditional bank loan.
- Loans from NBFC: Micro, small, and medium enterprises can get loans from NBFCs (Non-Banking Financial Companies). If you fulfill the criteria of being an MSME, then an NBFC might be one of the best options. But your business must be at least three years old for the same.
- Equipment Financing: If the equipment price is too high to buy, you can opt for equipment financing. It is a direct financing in which instead of taking money as a loan and purchasing equipment, you directly buy it on loan, making it convenient and more accessible.
- Pledge your Future Earnings: If you are sure that your business can generate enough cash flow, then you might pledge some of it now to get a loan.
- Venture Capitalists: A venture capitalist is much more than an angel investor. They provide capital to Ventures to make money when the business succeeds. However, be very careful while choosing a VC and a reputed one because you have to work closely with them.
- Your Life Insurance Policy: If your life insurance is not a term policy, this might be one of the options to finance your small business. You can borrow against its cash value. You can even invest your savings into your business.
