small business financing

 

 

 

Starting a business venture is always exciting but there is a lot that goes into the whole process right from the planning stage to executing and running your business successfully. The first thing that is required for you to start your business is to understand the nature of the business you are venturing in, the kind of industry you are getting into, your own skill set and how you are going to finance your business. Even if you are starting a small business, you need a strategic plan of action that accurately presents your business as a viable entity. It is obvious that staring any kind of business needs some money for overheads and other expenditure. There are various ways in which you can get finances for your business.

While some people invest from their own savings, others take loans from banks and other financial institutions and some others borrow it from friends and relatives. Borrowing from the banks will mean paying off the installments with the interests charged on the principle amount. Hence, one needs to make arrangements for the same. If a businessman is successful with his payments to the bank, then your credit rating goes up and banks will trust you in case you need to borrow more for your business.

If you feel that your business has a lot of potential but you do not have enough money, you could also get an unsecured loan from the banks. However, if you feel that you have enough capital to start up a business, you could still borrow from the bank using your assets, such as property, stocks, machinery etc. For small businesses, it is always a good idea to use a combination of resources for financing your business which means that you invest a part from your savings, borrow a part from friends and relatives and borrow some from the bank than to borrow the entire sum from the bank. Find out the exact amount of money that one will actually need. The next step is to decide whether you want to use your assets, or borrow against your house, or borrow from relatives etc. Take each step wisely and remember that well begun is half done! While India has a varying industrial sector in terms of size, the small sector seems to be flourishing in both the urban and rural areas. Hoards of families have set up small businesses that bring home bread and butter and fulfillment of necessities. While many could set up on their own, there are yet others who require small business financing.

Seeking small business finance is as difficult as large business or industrial financing. At the very base when seeking finance, one must be ready with a strong project report. This report has to contain the background of this business venture, the balance sheet if it is already in existence, projected profit and loss statement, amount required and its utility, basis of returns, etc.

Undoubtedly, every financier is aware that there is a risk factor involved when financing a business, whether big or small. But then, he is ready to take a calculated risk if the returns are expected to be far higher than the investment, whether in the short-term or long-term. Usually banks encourage small business financing by providing loans, which again depends on the project report.

While financiers are interested in the returns and the role they would play in the company, the banks are mainly concerned with how the customer would be able to pay back the loan. Banks charges an EMI on the finance it provides. Some financiers may insist on receiving interest on finance given or then may demand a stake in the company. The final deal depends on how strong the business prospects are, no matter how big or small it maybe.  ~ author Karishma Bajaj. 

 

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