Sources of raising debts for Startups and SMEs
Food works like a fuel for the body and helps it in keep going everyday just like this the finance acts like fuel for any business that helps it in keep going. To give a kick start to the business more fuel in the form of finance is required. Usually, people don’t have enough sources of finance to fund their startup ideas and as a result fails to bring them into reality. However, with the made in India initiative of Prime Minister Narendra Modi there are many financing options given to the to the start-ups or the small scale industries by which they can start their work. There are number of ways to raise money from the market. In this blog we will be taking a look at the major sources of fund raising in India. Through this blog we will be taking a look at the different sources of fund for startups or small and medium enterprises.
For the business unit there are only two options for the business units to raise funds that are equity and debts. However, due to the involvement of public money it is not allowed to the small companies or startup to raise money through equity funds. Thus, the only practical source available to them is debt fund. So through this blog we will be taking a look at the distinct types of debt raising sources.
Financial Institutions loan-
Due to the start up India initiatives gaining popularity a particular department has been dedicated to providing loans to small companies. Every company by fulfilling the minimum criteria as stipulated by every bank can get a loan from a bank. There are multiple factors that are considered by banks to give loans like earning potential, annual turnover, credit scores, etc. Also there are various types of loans that you can take like the working capital loans, term loans, loan against property, etc.
Venture capital are the kind of private equity firms that provides funds to the companies who are at the emerging stage. In exchange of the fund these private equity firms get the equity, or an ownership stake.
Every market is usually run on the credit services given by the suppliers of the material. Taking goods on credit is a good way to take some for arranging for funds. It is a optimum way to meet the short term expenses.
Apart from the business loans the entrepreneur also have an option of taking the personal loans from the bank for meeting the finance needs of business. They can provide their personal assets as the mortgage for the business.
It is a comparatively newer concept when it comes to raising the debt for the small scale companies and the startups. According to this concept the stratup take small amounts of money from multiple sources and pool them for creating a large finance. In this manner the SEM’s are able to raise funds.
With so many options surely it has become much easier for the firms to raise funds. However, it is highly recommended that proper care must be taken before taking any loan so as to avoid problems at later stage.