To achieve organisational objectives and accelerate growth, enterprises need an adequate amount of funds. While venture capital is a viable option, entrepreneurs often avoid it due to ownership and control dilution. That said, today, there are various sources of finance available in India to help you fund your business-related expenses. Thus, as an alternative, businesspersons can consider opting for any of such options to raise capital for their enterprise.
Best Ways To Raise Funds For Your Business
Here are some of the best financing options for businesses:
Business Loans From Financial Institutions
Usually, financial institutions, such as banks and NBFCs, are the first thing that comes to the mind of entrepreneurs who are looking to raise capital for business. Such lenders offer financial assistance to help enterprises finance the purchase of new machinery, fulfil working capital requirements, and meet other business-related expenses. However, the application procedure for a business loan can be quite tedious, owing to the stringent eligibility criteria and documentation process. Moreover, the rate of interest and loan tenure varies from one financial institution to another.
Business Credit Cards
Business credit cards might be an option worth considering for companies that require a long credit cycle to expand their operations. They come with high credit limits that can help you to finance the majority of the expenses. Moreover, this financial instrument also enables business owners to improve their credit score from the first day. That said, one must note that a business credit card is an expensive financing option. If businesses don’t make timely repayments, they have to pay late fees and higher interest. In addition, entrepreneurs might have to pay a high fee yearly just to keep using the card.
Compared to the two sources of funding mentioned above, revenue-based financing is relatively new. Under this method, businesses can raise capital by leveraging their estimated revenue. In simple terms, companies can access funds by pledging a percentage of their past and estimated revenue. Since this financing option does not involve any collateral, there’s no fear of losing a vital asset. Generally, financiers charge a flat fee as a percentage of their monthly earnings. Furthermore, by opting for revenue-based financing via leading fintech companies, such as KredX, you can access funds within 72 hours*, owing to a hassle-free application procedure. This method is an ideal option for businesses that have a proven track record of generating sufficient revenue. Nevertheless, one must note that recording a substantial turnover is not necessary to avail revenue-based financing. Therefore, even companies with annual revenue of Rs. 10 lakh can opt for this funding method to meet their business-related expenses.
Invoice discounting is a process through which businesses can leverage their unpaid invoices to meet various business-related expenses. The procedure involves companies selling their accounts receivable to financiers who provide a percentage of the total value of the unpaid invoices as a cash advance. As a result, businesses can utilise the funds availed to fulfil their working capital requirements or accelerate the expansion of operations. Leading integrated cash flow solutions providers like KredX offer this facility to businesses within 72 hours via a paperless process. Thus, if you primarily sell goods on credit, this financing option can be a perfect fit for your business.
With an extensive range of financing options available in India, businesses must choose a funding option that is best suited for their needs. Indeed, venture capital has been a favourable financing option for investors over the years. However, since founder ownership is reduced, entrepreneurs often consider other sources of funding. Often picking one out of the various available financing options can be a challenge for businesses. However, weighing in the features and limitations of each financing option can simplify the decision significantly.
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