Business Funding Options - Business Loan Blog - Tata Capital

5 Funding Options For Small Businesses in India

Mar 07, 2017

For a small business, funding is often the greatest concern. Capital money is vital for the company to run smoothly in its initial stages without experiencing financial roadblocks. This, though, is not easy to come by.

However, with the changing landscape of modern business, there are numerous options available. Here are five funding options for small businesses regardless of which industry they belong to:

  1. Personal savings
    This is the easiest method to fund your business. Personal savings can be quite helpful in the birth stage of a company. But it only works if you have enough savings to put into the business.

    You don't need to make an elaborate pitch to convince someone about your business plan. If you have the money and confidence, just do it already! But, bear in mind that you are exposed to significant risk since your income is entirely dependent on the success of your business.
  2. Friends and family
    Alright, you have a brilliant idea but no money to convert your business into reality. Now is the time to collect back favours that are long overdue from friends and family.

    But no, you don't need to call up your relatives in the middle of the night demanding they hand over their hard-earned money for your business. There is a proper method to seek their funding.

    Provide them with formal financial data and future projections. Give them a rough estimate of when they may see their money again. And never make promises you cannot fulfil. While funding from friends and family can come in handy, it is important that you don't jeopardise your relationships.
  3. Angel investing
    If you are a small business looking to consolidate and expand your operations, it is a good idea to catch the eye of an angel investor. There is no dearth of angel investors out there looking to invest in small businesses that show potential. Companies such asRedBus and Myntra benefitted through funding by angel investors in their early years.

    As always, make sure you have a solid business plan before you set up a meeting with an investor. And if everything goes well, you stand to receive substantial financing that can help you meet your business needs.
  4. Business Loans
    Debt-financing can be a huge lifesaver for companies that are just starting out. Most banks offer small business loans but to avail them you need to have collateral and a good track record. However, you will find that there are a lot of other organisations too that are interested in providing loans to small businesses. With the range of options available, you can choose loans to finance both short-term and long-term goals.
  5. Crowdfunding
    The internet has radically changed the way businesses seek funding. There are numerous websites such as Indiegogo, Ketto and Wishberry that cater to small businesses.

    Instead of a single large investor, you have thousands of potential investors who pool in small amounts of money to finance your company. These investments can be in the form of equity or debt. Some websites also allow companies to offer rewards or products in exchange for investments.

In conclusion

It is important to do your homework thoroughly before you choose a platform. The terms and conditions can vary for each platform. Some may charge a processing fee for the money raised while others may claim a percentage of the money raised.