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How To Determine Your Small Business Financing Needs

Aman Khanna
 


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As an entrepreneur, you would require funds to leverage your assets and to generate profits. You might have started with your own funds, or borrowed from your acquaintances. Utilize the profits and the income to fulfil the financial goals. However, there is a point when those are not immediately available or they fall short.

Here Are Some Ways To Ascertain Your Business Financing Needs

Why do you need finance for? Is it to get started, to expand or to just have a buffer against the market uncertainties? You need to determine whether the funds are required for the working capital needs, equipment, or others.

There are several factors that determine your financial needs and their types.

Funds For A Start-Up

Whichever industry your business belongs to, as a start-up, you need financial resources for almost every process. These include:

  • Business and product awareness

  • Leasing or buying premises and machinery

  • Expanding human resource or marketing budget etc.

If you are applying for the loans, the very first time, you would probably have no credit history. Several lenders like a bank might be wary of giving you a loan. You can opt for equity financing through venture capitalist firms or the angel investor network. Likewise, you can choose business loans.

If you have no collateral to pledge, you can opt for unsecured business loans from the government or non-banking financial institutes (NBFCs). The loan approval process of the government initiatives is stricter.

Nikhil, who was expanding his online medicine delivery business to a different state (Bangalore), opted for an unsecured business loan from an NBFC. While expanding his business in Mumbai itself, he had chosen funds from angel networks.

Debt Component

During the growth stage, your business might have mopped up high debt. It might be showing an unfavourable debt equity ratio as per your industry standards. You would have to increase the equity finance component through angel investment, crowd funding, or venture capital. At the same time, repay the debt, and focus on income to service your assets.

Machinery Costs

You might need business finance just to repair, lease or buy machinery. There are several financial lenders who have a separate product cut out for the machinery expenses. With unsecured machinery loan, you can get cash without collateral. Bajaj Finserv provides machinery loans with coverage up to Rs. 30 lakh without collateral. You can get these loans approved within 24 hours and they are disbursed within 48 hours.

Working Capital

As an entrepreneur, you need to be vigilant of your operating cycle. It gives an idea of the money required for daily operation, and how much funds are available with you.

You need to know the time it takes to convert inventory into product. Then understand within how many days the invoice gets encashed.

The projected market and the inventory in stock must be figured out as well. Your accounts receivable might not be sufficient to fund the working capital. It is here that a working capital loan is useful. The options of trade credit, or factoring may not always be sufficient.

You can fund the working capital expenses such as salaries, rent, bills and others with working capital loan from Bajaj Finserv. They provide a flexi loan or line of credit that allows you to withdraw money as much as needed without using up the whole limit.

You can also take general business loans for any of your business financial needs. Be it seasonal expansion, long term growth or building a credit score, small business financing will always keep you going.

NBFCs have become the key financiers to businesses, especially micro, small and medium enterprises (MSMEs). Business Loan Bajaj are offered for a tenor of 12-96 months. The EMI of their loans include only the interest component. The principal can be paid at the end of the loan term.

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