Last Updated on July 18, 2024 by Nasir Hanif
The ongoing economic difficulties have caused the disruption of the global supply chain, which led to a deterioration of cash-to-cash cycles. As a result, many small businesses in India bore the brunt of the financial instability, and many saw a reduction in their assets. Around 69% of businesses were burdened with liabilities.
Many financial institutions in India introduced new services in the working capital loan industries. Their financial products acted as lifesavers for small businesses. These allowed businesses to meet expenses for raw materials, paying salaries, rent, electricity bills, etc. This, in turn, allowed businesses to remain afloat and prosper as the situation improved.
The working capital formula is calculated by subtracting all current liabilities from assets. Having a net positive working capital allows small businesses to balance assets and liabilities, even in turbulent times. If you are in dire need of working capital, here are some ways you can raise funds.
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Through loans from NBFCs
Financial institutions like Bajaj Finserv offer special business loans to small and medium enterprises (SMEs) for their everyday operating costs. These are unsecured loans with favorable interest rates and they don’t require you to keep your business’s assets as collateral.
Working capital loans allow businesses to meet seasonal or cyclical demands without having to stake collateral. You will need a good credit score and business vintage to avail of such loans.
Investment from Venture Capitalists (VCs)
VCs provide small businesses with significant funding for the initial stages of their growth. Venture Capitalist firms are responsible for achieving certain returns and thus, get a say in managing everyday operations. In addition, they provide mentoring services and help a business to keep it sustainable. Applying for investments with VCs is difficult but allows you to focus on your business without financial woes.
From trade creditors
An alternative to working capital loans is to get financing from trade creditors. They can provide trade credit as business supplies and equipment. This arrangement without direct funds helps business owners keep operating their business and get enough time to procure cash to repay the creditors. Before giving a loan, they will check the borrower’s payment records and credit history. If you have trouble with your credit history, find out what to do if your business’ credit score is low.
Angel investors
Angel investors have accredited individuals with a net worth exceeding Rs.7 crore and or an annual income exceeding Rs.1 crore. They can be a great source of capital for your business. You will need to have a solid business plan put together and capture their enthusiasm with an excellent pitch.
Crowdfunding
Crowdfunding allows a business to reach a large pool of individual investors through an online platform. The investments can be debt or equity-based, and investors are usually promised rewards for their investments. It also allows businesses to pitch ideas to different investor groups who may help you keep your businesses afloat. You can also take the help of reliable crowdfunding marketing company to promote your crowdfunding campaign.
Equipment/machinery loans
Another alternative for working capital loan is equipment/machinery loans. Financial institutions provide this specialised funding to purchase essential and costly equipment with the equipment and some additional securities as collateral. There can be multiple reasons to get a machinery loan for your business, like being in a manufacturing sector or increasing your assets.
- Funding from business accelerators and incubators
In almost every major city, a number of incubator and accelerator programs assist hundreds of start-up businesses. These programs nurture a growing business and provide it with tools, training as well as financing. They run for anywhere from four to eight months and allow business owners to make connections with mentors, investors and start-ups.
Besides working capital loans, these are some additional ways for the owner to get financing to run their businesses. Additionally, one might take advantage of pre-approved offers that keep a ready stream of credit for regular use. Leading financial institutions such as Bajaj Finserv provides such offers to streamline the loan application process. You can check your pre-approved offer by providing a few essential details.
With plenty of funding options available, an entrepreneur need only choose the most suitable option for him/her. When it comes to business loans, you must also consider the eligibility parameters before submitting an application.
Apart from that if you want to know about “How Employee Loans Can Aid in Emergency Situations” then please visit our “BUSINESS” Category.
