If the business is not very large then businessman have options other than traditional bank loans to finance their business. Traditional bank loans require a very good credit score on part of the borrower and hence not everyone considers this option. Traditional bank loans have stringent processes and strict requirements, which increases the loan 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 in 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 require 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 is a type of funding your business online from a pool of investors. The investors find your project interesting and therefore they will pledge their money into your project to fulfil your dreams in return of incentives. Your goals have to be achieved within a stipulated period of time and your idea is brought to life.- Angel Investors: Angel investors provide much more than just finance. They provide assistance because they have been an entrepreneur before. They provide business related guidance too. You need to have a very solid business plan and need to know your business inside out in order to smoothen the process.
- Factoring: Even if you have a very poor credit rating you can opt for factoring. Factoring is a method of raising funds by selling your receivables in advance at a discounted price. It is indirectly getting your money today instead of future. There is a fee involved or a percentage of the total amount that needs to be paid. It is not the best option to consider but definitely one of them in case of emergencies.
- Use your Credit Card: Many cards offer zero percent interest rates, therefore, this may be a choice to be considered. In other cases, if your card charges a very high rate of interest then it is not a very viable option to choose. Even if the interest rate is low just make sure that your credit does not exceed your income or you'll end up paying much more than a traditional bank loan.
- Loans from NBFC: Micro small and medium enterprises are eligible to 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 to choose from. But your business must be at least three years old for the same.
- Equipment Financing: If you find the price of the equipment too high to buy, then you can opt for equipment financing. It is a direct kind of financing in which instead of taking money as a loan and then buying equipment, you directly buy it on loan making it convenient and easier.
- Pledge your Future Earnings: If you are sure that your business might be able to generate enough cash flow, then you might pledge some of it now in order to get a loan.
- Venture Capitalists: A venture capitalist is much more than an angel investor. They provide capital to Ventures in order to make money when the business becomes successful. However be very careful while choosing a VC and choose a reputed one because you have to work with them very closely.
- Your Life Insurance Policy: If your life insurance is not a term policy then 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.
