Sources of Emergency Funding for Small Businesses Available If You have been Denied a Government Loan

Every business in India, whether big or small, has to deal with funding struggles at some point on its journey. Ventures like small businesses and startups face this scenario more often than others, as they have limited support in their nascent stages. While the Indian Government supports SMEs with various tailored schemes, the eligibility criteria may not be to the liking of all such firms. At such stages, alternative funding options can be critical to keep your small business out of financial uncertainty. 

Alternate Funding Avenues for Your Small Business

Even if are unable to secure urgent financial support for your small business via Government schemes and loans, there is a wide range of other funding sources that you can choose from – 

• Self-Financing: 

This is often the first step to starting a small business. To self-finance your venture, you can use your personal savings, mutual funds, stocks, bonds, real estate or some form of inheritance that you might have. This initial capital injection using your own resources provides your venture with a solid foundation and allows you to shape its early development as you deem fit. 

• Angel Investors: 

Here, you have to seek out individuals or corporate leaders who have surplus funds, believe in your business idea, and are willing to invest in it. Besides providing capital, they also offer an extensive network of connections that can take your business to new heights. This is a particularly beneficial approach for startups with promising concepts as angel investors also contribute to your venture's long-term strategy. 

Check Out: How Can Small Businesses Deal With Emergencies

• Venture Capitalists: 

These are financial powerhouses, who are willing to inject capital into high-growth potential businesses in exchange for equity. For this, they must be aligned with your business plans and goals. Venture capitalists bring substantial financial backing, strategic insights, and industry connections. Forging alliances with venture capitalists can provide the necessary resources and expertise to businesses aiming for rapid expansion and scalability. 

• Peer-to-Peer Lending (P2P): 

Peer-to-peer lending platforms allow investors to lend money to startups, providing quick capital access. While interest rates can be high in such a lending set-up, the Reserve Bank of India ensures fair practices via certain regulations. This creates a level playing field for both borrowers and lenders, ensuring transparency and security in their financial transactions. 

• Crowdfunding: 

Crowdfunding involves garnering support from individuals who share your passion and believe in your business idea. This can be of various types, like equity-based crowdfunding, reward-based crowdfunding, and debt-based crowdfunding. This financial support allows entrepreneurs to raise funds from a wide range of supporters who are aligned with their business vision. 

• Small Business Loans: 

Banks and Non-Banking Financial Companies (NBFCs) offer diverse business loan options in India. These include working capital loans, secured loans, unsecured loans, overdrafts, and more. These financial institutions provide a stable and established source of business financing to support rising enterprises. They have a wide portfolio with varying loan amounts, interest rates and tenures that you can choose from according to your specific needs. 

Also Read: Challenges Borrowers Face While Taking a Business Loan

Benefits of Small Business Loans

Small business loans come with several advantages that make them a standout choice to fund your venture – 

• Easy Application and Approval: Small business loans have a fast application process, with approval often coming within 48 hours. The online documentation process is streamlined which saves time and makes the entire process efficient and hassle-free. 

• Flexible Solutions: Small business loans are tailored for entrepreneurs as they provide customised solutions. This means added flexibility in terms of interest rates, repayment terms, and EMIs as per your financial capabilities. 

• Tax Benefits: Small business loans come with a cherry on top as the interest you pay is tax-deductible under the provisions of the Income Tax Act of 1961. This helps to significantly reduce your income tax liability. 

• No Collateral Required: Several lenders sanction loans to small businesses without any collateral. This approach allows them access to key financial support without having to risk valuable assets.

How to Choose the Correct Financing Route

Selecting the correct type and source of finance for your business is a critical decision where the following points should be kept – 

• Assess Funding Needs: Evaluate the precise amount and duration for which you will need funds for your business to make a well-informed decision 

• Know Your Sources: Understand what finance sources are available for your venture and which of them aligns with your specific goals now and in future 

• Consider Collateral Needs: Determine if any collateral is required or available for your funding needs and how it makes a difference in the lending terms and process 

• Review the Process: Familiarize yourself with the application process, and understand where and how you can access funds suitably 

• Check Repayment Terms: Be aware of when and how much you need to repay to ensure that you can stick to your financial commitment 

• Explore Multiple Options: Thoroughly evaluating all your options is a prudent approach to decide the best choice for your business financing 

Securing funds for your small business, whether it's a new venture or an expansion, requires a nuanced understanding of various funding options available along with their pros and cons. For starters, explore the Business Loans offered by top lenders on Bajaj Markets and assess the one best for your business. Seize this opportunity to propel your business to new heights today!