How to Finance Your SME Business..!

How to Finance Your SME Business..!

 Today there are innumerable ways of financing one’s business and small businesses do not need to worry about their capital anymore in most cases. 

Banks and NBFCs like Bajaj Finserv had tailor made loan options for businesses today and there are many other ways of financing a Small and Medium Enterprise. Here is a brief overview:

●      Traditional Bank Loans: 

Most entrepreneurs opt for a bank loan when they are in need of cash for their businesses and it is a conventional and yet very secure method of gaining SME financing. 

One can contact them about their small business lending practices. One has to fill out a loan application form, which can also be done online. The basic details of the company are sought, like how long ago the business has been established, the type of business it is, which kind of products or services the company sells, whether the taxes are regularly paid, and the like. 

However, some find this kind of loan a bit cumbersome, especially if it comes with high rates of interest.

●      Self Financing: 

Self Financing might seem difficult at first but with some careful financing planning, it can actually turn out to be one of the most rewarding options. If one already has plans for starting a business in the near future, then one should start saving accordingly and have a clear valuation of one’s assets and one’s excess cash. One should also have a good cash reserve as a backup. 

One can opt for a home equity loan on the portion of the mortgage already paid. Banks usually offer a line of credit on this amount and once the business starts making a profit, the loan can be repaid and the mortgage on the house cleared, securing the asset again. With self financing, there is no need to be dependent on or answerable to anyone else. Friends and family members may also help out.

●      Crowd funding: 

Crowdfunding is fast becoming a popular method of financing one’s business. The

 benefits are huge and with internet becoming a great method of networking, finding like minded people who will finance the business is quite easy. 

One can use websites like Kick starter to start a campaign, finance a goal and then also offer rewards to people once the enterprise succeeds. There is no need to repay the money, or give away any equity and the money can be used to finance many non- profit enterprises as well.

●      Product Pre-sales: This can be a veritable source of finance when it comes to businesses but it is often overlooked. One can sell products before the business launches, but the products have to be fully developed. One has to remember that if the products are not ready for the market, it could adversely affect the future of the company. 

Alternatively, One can also opt for Angel Investors and venture capitalists for financing. One can expect a 20 to 25 percent increase in the initial investment through them.

Certain documents required for MSME loans have to be provided in the final stage of the application. Photo ID and Age Proof, Address Proof and the IT returns for the last three consecutive years are required. 

For salaried people, one would have to provide the salary slip of the last six months and the bank statement of the last three months. 

Those who are self employed or have their business will have to provide the TAN as a business proof, along with sales tax documents. Apart from these, the creditors could ask for any other documents as per their requirements. 

Bajaj Finserv offers SME/MSME loans at competitive rates of interest. Check your pre-approved offer here and apply for loans up to Rs. 30 lakh. What’s more, you can apply with only a couple of documents.

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