How To Raise Capital For Your Business Quickly
Do you want to raise funds for your business? Here is a list of funding options for small businesses which will help raise capital quickly. Visit to know!
Any company or organization requires funds to start a new business, manage inventory, make payments to staff or vendors, pay off debts, and manage operating costs. Mostly, based on past expenses and future estimates, many startups and businesses take a line of credit as a back-up to manage their expenditures.
However, many a time expenses can turn out to be higher than projected and greater than the revenue to be generated. Sometimes companies may not have adequate assets to liquidate. During these times, companies and businesses may take working capital loans from banks or non-banking financial institutions to meet their expenses.
Broadly, there are two types of capital that a business can raise: equity and debt. Depending upon the type of capital, a company will have to tap different sources to raise funds for their business.
Over the past decade or so, it has become much easier for businesses, especially new-age startups, to raise equity capital. There are now a wide variety of options available, from angel networks and venture capital firms that smaller companies can approach to private equity firms that more mature businesses can tap.
India has several angel investment networks that fund startups. An angel investor is a high-net-worth individual who invests in small startups or entrepreneurs.
These investors, either individually or as part of a network, provide money in exchange for an equity ownership interest in a business. Since angel investors have a vested interest in a company, they offer much more than financial assistance. This is what differentiates an angel investment from a business loan.
But for many startups, it may mean lesser independence and compromised decisions since angel investors receive a stake in the business. Besides, finding angel investors can be time-consuming.
For business entities and entrepreneurs not willing to compromise their ownership status, as is likely in angel investment, crowdfunding is a good alternative to dealing with a financial crisis.
Unlike in angel investment, in crowdfunding a large number of individuals donate money in small proportions to raise funds and finance a new business venture. However, there are certain restrictions as to who can fund and how much they can fund.
Crowdfunding is done online. To secure funds through this method, entrepreneurs must prepare a project plan and post it online on crowdfunding websites.
If entrepreneurs don’t want to dilute their ownership in their business, they should opt for raising debt capital. Both banks and non-bank finance institutions provide a variety of options to businesses looking to borrow money. Here are a few options.
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A business loan is the most common form of debt for companies and entrepreneurs. Business loans can either be secured or unsecured. A secured loan requires the company or the entrepreneur to provide collateral to the lender, while an unsecured loan has no such requirement.
Typically, banks and NBFCs provide unsecured loans of a smaller amount, say between Rs 10 lakh and Rs 25-30 lakh. Such loans are approved after reviewing the cash flow or balance sheet of a business. These loans are sanctioned and disbursed in a short time, usually within a few days. This makes these loans ideal for small businesses that require money quickly.
A secured loan can be of a much higher amount, and typically takes a little longer to approve than unsecured loans, since the lender has to verify the value of the collateral.
Equipment Or Machinery Loan
Equipment and machinery loans are popular with agriculture, manufacturing, mining and construction industries, where sales and productivity depend largely on machines.
It is important for companies operating in these industries to have the latest equipment and to periodically repair and service the equipment. This involves a considerable cost.
Business owners who do not have sufficient capital but want to buy new machinery or are planning an upgrade and repair of the old and faulty machinery can have a machinery loan. A machinery loan is not just a convenient way to secure funds, but it is also a great opportunity for business owners and enterprises to enjoy tax benefits.
A bank overdraft is a practical solution for businesses to secure short-term credit so as to finance their unexpected expenditures.
Essentially, a bank overdraft is a line of credit extended by a bank to corporates and other clients. This allows them to withdraw short-term funds from their accounts in excess of the balance they maintain in their accounts. An overdraft is helpful when there isn’t enough money in an account to make transactions.
To raise money through bank overdraft, a good relationship with the bank and a good credit score are essential. The overdraft facility is provided by banks generally on an annual arrangement or maintenance fee.
Only a few businesses can survive on the owner’s personal resources. A majority of them depend on external funding. There are different types of funding available to raise capital. Understanding the distinction between each funding type is important.
For those who are willing to dilute partial ownership of the company, angel investment can be a good option in the early stages of a business. But if time is of essence, crowdfunding is a good alternative.
For most companies, however, a loan from banks and NBFCs is the most viable solution to fund and grow a business.
If paperwork and disbursal processes are your concern, non-bank lenders such as IIFL Finance are good options. IIFL Finance offers different types of loans to meet a variety of business requirements. It even matches the loan repayments with the invoicing and cash flow cycles of the borrowers.
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