5 Clever Small Business Financing Options in India

For a new small business in India, like everywhere else globally, finance is the key to success and sustenance. Efficient and consistent fundraising is not the easiest of jobs. Still it does not have to be the toughest either. Traditionally banks tend to be the first and most preferred source of raising capital. Though they do not necessarily have to be the only option.

 

For a business to get to the stage of revenue generation and a profit making stage, the initial solid push is critical. That push comes from money. It might be for a brand new business starting out or a small business looking to scale up.

 

Here a few ways in which that money can be raised smartly.

 

Alternative methods to raise finance for a small business in India –

 

With the digital economy taking flight with rocket boosters, one has to think beyond banks. There are a number of other reliable options that can be explored. Such as:

 

Angel Investors 

While most business owners are familiar with angel investors, in simple terms, these are individuals with interest, initiative and investing power looking to vest in businesses. They keep a close watch on sectors that they think will work best for them and will be interested to fund businesses that meet their profitability criteria. Typically they operate as part of networks where they collectively scour through proposals and business plans to finally decide which ones they are going to support. Getting the nod of an angel investor(s) to fund a business is a big deal for most businesses. Depending upon their background and expertise, angel investors also tend to take a keen interest in the business and offer advice and suggestions for improving the revenue generation. Need to know the 8 most prominent angel investors in India? Read this article on Forbes online.

 

Crowdfunding

Crowdfunding is already a great fundraising option albeit a fairly competitive space. Given the popularity and ease of accessibility it’s fast turning out to be a preferred method for particularly startups. Crowdfunding literally means getting individuals to invest or give money for a business idea by putting it out there on a crowdfunding platform. Of course, the idea has to have potential and the investors need to see some ROI before they commit. Even so, this one is a fairly new age method and those who know how to play it properly can get good support for their business or business idea. This link lists the top 15 crowdfunding websites/services in India.

 

Lending Institutions

There are a number of independent lending institutions that can help raise finance for a small business in India. The requirements to secure a loan can be exhaustive for a small business at most banks. Unlike banks, these institutions are willing to take the risk to finance a small but solid business if basic eligibility criteria are met. This is a very effective source as there are high chances that the loan will come through. These institutions exist to cater to the newer and smaller entrepreneurs who have trouble taking their proposals to traditional sources. While they don’t come with as great a repute as banks, the financial help provided by them is great for most small businesses. Lendingkart is one of such institutions in India.

 

Bootstrapping

While mostly explored by startups, bootstrapping can be an effective way of securing finance for smaller existing businesses as well. A small business requires capital when wanting to scale up or expand. It can also be for acquisition of equipment, logistics or payroll management. Bootstrapping involves either investing one’s own funds into the business or getting some money from friends and family at low interest rates. It’s imperative to understand that this method works if the loan requirement is not too high. As the popular saying goes, one shouldn’t keep all their eggs in one basket.

 

Venture Capitalists

Funding from a venture capitalist is like finding a diamond in a coal mine. It’s hard to come by, but scores incredibly big points for a business owner. Most VCs prefer to support existing small businesses as opposed to startups. If they find proof of potential and scalability, they come on board not only with money but with expertise, mentorship and a lot of guidance. They tend to stay with the business till it’s either acquired by someone or till it goes public. The only possible downsides are that they exercise control and there is a lot of accountability towards the VCs.

11 Important Things Your Competition Can Teach You About Finance

Competition is the bane and blessing for every business owner. As a business owner you need to keep an eye out for what your competition is doing. This is the ground rule and needs to be followed. In principal, keeping a track of others who are in the same business as you whether it’s for their marketing tactics, their communication, their growth rate and numbers or their new product or service announcements is all part of the game.

The question you might ask is- why do you need to do this?

Here’s why. To learn from the successes and even failings of your competition is smart. Others might be in different development stages than you are and already employing tactics that you intend to explore. Knowing how things are working for them helps you to plan and execute better. Plus, they might be doing some things right. It’s good to adapt and use those solutions for your own business wherever applicable.

For example, let’s take finance. Here are some important things your competition can teach you:

Scale:
As a business already in existence, the next obvious step is to scale up since every business wants to grow. How to use your funds to expand your business is a key question. Given that expanding is a big move you need to put some research in it otherwise things can backfire. This is where you can take a leaf or two from the books of those who have already done it and how it worked.

Managing cash flow:
How you manage your finance is very crucial to the success of your business. Plus, this is a basic requirement for future loan applications. Try to find out from your competition on how to best manage cash flow and learn from them to do this more effectively.

Allocation of money:
How to allocate your existing funds and where to put how much is a big part of business decisions. Those in the same business as you might have understood this well and being able to lay your hands on that strategy can benefit you immensely.

Brand building:
Brand building is very important. How your competition is using their money for communication and advertising is something that you need to learn from all the time. Especially from the ones who are getting it right.

Raising money:
A business needs capital all the time, whether it’s yours or theirs. Some people are more skilled at raising it than others. Keep an eye out for others in the same business as you and incorporate methods that they are employing to get funds and see if you can adapt those methods for your own business. When it comes to small business working capital loans, we at Lendingkart, are always ready to help.

Strong base:
As a small business while growth is important, being able to have a strong base is extremely critical too. If a business grows continually but does not spend some time is deepening its roots, then this can lead to cracks that can pose big issues if left unattended. How your competitors are using their financial resources to consolidate and deepen their roots can help you understand how to do the same with yours.

New Ideas:
No business can grow without new ideas and innovation. How your competitors are using their money to encourage and build on new ideas is something that you can learn a lot from. It is also a very effective use of your money.

Accounting:
Learn from your competitors on how to measure results and profits. A robust and dynamic accounting system can help you reach a good benchmark. Getting this right is very important. Clear financial records are a must and no financial decision can be fruitful without paying attention to numbers.

Prepare for lows:
Every business goes through lows and a part of managing your funds properly is directly linked to being able to survive the challenging times. Understanding how your competition is preparing for such scenarios is very helpful for you to be able to do the same. A competitor who may have successfully managed their financial situation can offer ready solutions but what is important to consider is that another one who might not have done that well will also have some lessons to impart. Don’t ignore those lessons.

Tax:
Another key area directly related to finance is tax liability and how to manage your funds effectively to make sure you do not accumulate a lot of it. Find out which of your competitors is getting this right and see if you can use some of their processes and practices in your own dealings.

Return on Investment:
How your competition measures return on investment can inform your own financial decision making into a more productive space. Learn from their strategies and assess their gains to see how you can maximize our own.

Learning from your competition can be a mix of do’s and dont’s. The idea is to keep your eyes open and recognize the opportunity to learn. Then feed that learning back into your own business for better results.

750% Growth – This is How Success is Defined!

The Curtain Call of Coir – G Sindhu’s Entrepreneurial Story

In 2007, a remote area of Modakupatti in Tirupur saw the emergence of Evergreen Enterprises. As a company that dealt in coconut and coconut products primarily, it wasn’t much of a contrasting setup in the locale. The defining trait in the company was that it was being spearheaded by a woman, being in an industry that is mostly male dominated.

A graduate from the University of Warwick, G Sindhu made a bold move of taking over her husband’s family business. While keen business acumen and dedication were the keys to turning the tables in her favor, this woman entrepreneur opines that having a sharp lookout for the relevant opportunity can go miles in making the best of any situation. While the initial challenge was convincing the family to let her take control of the business that comprises 99% men as suppliers and buyers, there were further business challenges as well.

The challenge of coping with the shortage of human resource was handled in a very smart way. Locals of Modakupatti were trained and recruited to serve as the manpower for the startup. This has resulted in the employment of over 100 uneducated people and now they have a steady livelihood thanks to the company. Evergreen Enterprises works mainly out of Modakupatti, and has a business office in Coimbatore.

For the problems concerning funding, G Sindhu tried approaching banks. But unnecessarily long processes and requirements of collaterals made the entire situation too muddy to cope with. Another bold move on her part was approaching an alternative lender, Lendingkart. The business had taken up all of the pooled capital and she was looking for cash flow. “The speed of processing the loan was very fast, compared to public sector banks”, says G Sindhu. An avid supporter of the role of technology in furthering a business, a fintech company like Lendingkart made more sense to her than traditional banks.

In just a year of taking over the business, G Sindhu has made the company increase its turnover by 750 percent. In the past 2.5 years, the number of clients for Evergreen Enterprises has shot up from 10 to a considerable 140.
Citing a few words on accountability and goal-setting from the successful entrepreneur herself – “(We) follow a system to measure the progress and set the goals every day, every fortnight and every 45 days. This fosters accountability among team members.” Working alongside farmers, clients and team members, she suggests that an amiable environment for all of them is the key to growing a business.

Small Business Loans – The Working Capital Angle

Ever since I started off in a retail lending team at HDFC Bank and even now, as a decision-maker in one of the leading fintech lenders of the nation, I have always been asked by clients about the kind of business loan that would be the best for every situation. Simply put, there is no single loan that comes with a ‘one-size-fits-all’ feature. But when it comes to which business loan can be used in many situations, if not all, I could lead you through my insights and let you decide for yourself why working capital loans offer the best advantages. The current market scenario is rife with financial options to help in the smooth running of any business, small or big. These options could include multiple banks and NBFCs or even new age fintech firms like us, the Lendingkart Group. Though the sources are a dime a dozen, availing business finance through official channels is always bound by regulations and people resort to borrowing from friends and family or the local moneylender. Continue reading

Financial Falooda for Thought

You have a business and you hail from a family that has been selling and buying products since the independence of India in 1947. Or you could be one of those people who didn’t like taking orders from someone and you headed out to find your calling as an entrepreneur. Well, you could also be someone who took up business because anything else didn’t make sense. Or maybe you were just curious how the life of an entrepreneur was and you decided to step into the shoes of one. You are of course the best judge of it all. Indeed, you could be neither of the above but know someone who is. Irrespective of that, this post is one of the many that will follow which will give you an insight into how businesses operate, what to keep in mind when taking some crucial choices, what financial decisions could possibly be better for you. Always keep in mind though, the facts in this blog are corroborated by research and the opinions expressed are of people just like you. Continue reading