You might require funds as a small business owner to expand your business, for more marketing activities, to buy the latest technology, hire more experienced professionals, etc. There are many funding options available in India, but it is ideal that you first go through each of them and choose one which will help your business the most.
It is necessary that you first decide how much funds you exactly need.
The best way to decide is by monitoring your business regularly. And if required, take help from an accountant for the same.
Some of the funding options for small businesses are term loans, bank loans, loans from NBFCs or unsecured loans, working capital loan, government schemes, venture capital, and invoice loans.
Here’s all about these funding options in detail:
1. Term loan
Term loans or long-term loans are defined as funding options where the lender is willing to finance any business idea so that the business meets its capital requirements. Term loans have a fixed duration, have a lower rate of interest which usually depends on the credit history of the business. These loans can be secured or unsecured with a fixed or variable rate of interest, depending upon the lender.
2. Bank loans
Banks provide loans for small businesses but mostly take something as security from the borrower. The interest rate of the loan depends upon the credit score of the borrower, fulfillment of the eligibility criteria, and all of the required documents.
3. A loan from an NBFC (unsecured loan)
NBFCs or Non-banking financial companies are financial institutions that offer unsecured loans (loans without any security) to small businesses at affordable interest rates. They have a simple online procedure to apply for a loan, and the loan disbursal is also faster as compared to that of bank loans.
4. Working capital loan
Working capital loans are short or medium-term loans which can be taken to fulfill the cash requirements of businesses who are looking to grow their business. The amount and the interest rate of a working capital loan depend on the eligibility of the small business.
If you go for secured working capital loans, you will have to give an asset as collateral which is not feasible for every small business owner, but approaching NBFCs and other such financial institutions for unsecured loans is a better option based on your loan requirements and your credit score.
5. Government schemes
There are government schemes like CGS, SMILE, Credit Link Capital Subsidy Scheme For Technology Upgradation, NABARD, NSIC, Market Development Assistance Scheme, Technology And Quality Up-gradation Support, Mudra loan scheme, and Stand-Up India Scheme.
The CGS scheme works like working capital finance and term loans and offers loans up to Rs. 1 crore.
SMILE by SIDBI plays an important role in the promotion and development of small businesses and has schemes like Mahila Udyam Nidhi, Integrated Development of Leather Sector Scheme, etc.
Credit Link Capital Subsidy Scheme For Technology Upgradation
With the help of this scheme, small scale industries can upgrade their plant, machinery, and equipment with a 15% capital subsidy.
This scheme helps to import costly machinery on a hire-purchase basis. This scheme also helps in the distribution and supply of imported and indigenous raw materials.
Market Development Assistance Scheme
This scheme gives finances to help MSMEs participate in international exhibitions and trade fairs.
Technology And Quality Upgradation Support
The mission of the scheme is to make sure that MSMEs with manufacturing businesses are working towards energy-efficient manufacturing processes and technologies so that the manufacturing costs are reduced.
Mudra loan scheme
Mudra loan scheme is divided into three parts, Shishu loan (Rs. 50,000), Kishor loan (from Rs. 50,000 to Rs. 500,000), and Tarun loan (from Rs. 500,000 to Rs. 1,000,000).
Stand-Up India Scheme
Under this scheme scheduled tribe and scheduled caste women, entrepreneurs can get easy, cheap, and collateral-free loans to promote the micro-industries and enterprises.
With this scheme loans of Rs. 10 lakhs to Rs. 1 crore can be availed with a tenure of 1 to 10 years.
6. Venture capital
Venture capital is firms which provide funds for small businesses for the initial stages of a business setup. These firms usually invest against equity and are only a part till acquisition. Services like mentoring and evaluation for a business to sustain the competition are also provided to businesses.
7. Invoice loans
Invoice loans can be taken to raise capital due to the time difference between raising an invoice and when the payment is done. Banks mostly offer such loans at 80% of the amount of an invoice and the rest is due when an invoice is fully paid. A small amount of processing fee and a lower amount of interest is deducted in invoice loans.
Do you require a loan for your small business? Contact Gromor Finance for unsecured loans at attractive interest rates, and quick loan disbursal!