It has always been a matter of concern to obtain funding in order to sustain a business. Since bank loans are much of a standard means, most companies likely to opt for them. The source of finance entirely depends on the size and how much money you need for your business. For instance, bank loans and self-funding cover the financing if you run a small business. However, in the case of a medium-sized organization, there are other sources where you can get finances with minimal conditions. Hence, it is always best advice that you have a financial plan prepared with you.
Here are some of the sources you could consider while sustaininga business suitable for small and medium enterprises.
Table of Contents
Self-Funding/Bootstrapping
SMEs that raise their finance without any external debt are bootstrapped. In this, you don’t have to share your profit with someone else. However, it is common means of finance and depends on two things; first, how much money you need and the risk related to it. A small vendor can do self-funding, but a large manufacturing unit often needsa mixed form of finance.
Borrowing
It is a kind of investment but doesn’t require security. You can say it’s a personal loan without any interest when you take financial help from someone for your business, other name burrowing money either from a relative or a friend. So, this is also a significant source of financing considering the amount of money and unreliability.
Investments
Investment tool is a popular and standard way of financing a business. It means giving a portion of your ownership stake to someone else who is investing in your company. A partnership is one of the examples of investment. Alternatively, you can also provide some shares to the investors in the form of equity. It can be any percentage decided mutually.
Crowdfunding
It is the practice where you can raise money from a large number of people. Crowdfunding can be performed by taking donations, debt-based, or selling shares into the market. The famous stock market works in the principle of crowdfunding, where people invest their money in businesses, buy shares, and get massive profits in return. However, it is a good practice for various industries, but on the other hand, it’s a little bit riskier.
Finance Institutions
They are non-banking financial institutions and can provide short- and long-term loans to businesses, many NBFCs owned privately or by the government. Most people believe that taking financial assistance from them is safe and secured without strict conditions. Mahindra & Mahindra Finance Limited, Tata capital, are some of the popular NBFCs you’d find in the Indian market.
Debt Funding
Longer-term financing options such as loans from a bank or other lending institutions or bonds are called Debt Financing. They are the most accepted and popular means of financing a business. Although small and medium enterprises can get debt funding, the process involved is comparatively trickier for small businesses. More the loan amount more will be the risk related to it.
Government Investment
Small and medium organizations play a significant role in the country’s economy by generating more employment. The government is taking initiatives involving financing such businesses with an encouraging environment. You can always opt for government investment depending on the amount you invest in and the type of business.
Conclusion
One of the daunting tasks while running a business is providing financial assistance in order to sustain it. Taking a loan from banks or other lending institutions is the most common source for company financing. However, now various finance platformsare out there that have been regulated by both government and private-owned organizations so that you can finance your small or medium company by utilizing them.
