5 WAYS TO RAISE FUNDS FOR SMALL BUSINESSES

Financing a business is the most significant part of every business plan. Its importance is even more highlighted in the case of small businesses, as these businesses already have a shortage of funds, so they constantly strive to tap the sources of funds to keep their businesses running.

5 Ways To Raise Funds For Small Businesses

Here are 5 ways to raise funds for small businesses.

• Savings

  A full-fledged plan backs the commencement of business. Much research and the entrepreneur's wisdom goes into planning the business. Entrepreneurs must start saving when they have the instinct to start a business. Since business planning is time-consuming, it allows the person to save and create as many funds as he can simultaneously.

  
  

• Loans from friends and family

  Loans are the most common source of funding for every type of business. An entrepreneur must make every effort to contact and network with many people in order to raise funds from his circle of contacts. Since these loans are not from external organizations, they allow the entrepreneur to have flexible arrangements with the lender. This lowers the cost of debt and provides easy repayment options.

  
  

• Govt funding for SMEs

  With an increased focus on making countries self-reliant, the government provides various loans to small businesses at reasonable rates to incentivize such businesses. Numerous schemes have been launched by the government. Entrepreneurs can comply with the norms of such schemes and easily avail themselves of their benefits to boost their operations.

  
  

• Private capital Markets

  Countless venture capitalists and private equity firms operate in the business landscape, eagerly seeking to fund companies with strong growth prospects to enhance their wealth and business portfolio. A business can make strides in this direction and pitch strategically to lure such investors into financing their businesses.

  
  

• Loan from banks

  Banks offer loans for small businesses, but the rates of such loans are higher than those of credits from known sources such as friends and families. Since the interest rate is high, a more significant portion of the revenues is used to pay interest obligations, which lowers the business's net profit. Loans from banks should be the last choice to raise funds, as it imposes a risk on the company's existence in case of any default on repayment or interest obligations.

With many options for financing small businesses, the entrepreneur must strive for the best option. This involves proper research and evaluation of all the sources and assessing the feasibility of each one so that the selected source/sources are cost-efficient and help the business lay strong foundations for its success.