If you are self-employed and require extra funds for your business, there are few options you can choose from. Usually, the fund is needed at the initial stage of the business, or when you would want to expand or do any additions to your business. Acquiring a business loan from banks may at times seem demanding and chances of approval too might be bleak. Let us have a look at the various means through which a self-employed person can collect funds for his business.
The first place anyone would look for funds is their own bank account, and if there is some surplus amount it can be invested in one’s own business. This kind of investing is called Bootstrapping. At the initial stages of business, bootstrapping is the most desirable way to fund one’s business. At the embryonic stage, generally, your ideas would not be substantial enough to be presented to the third party for external funding.
If you have already availed a home loan or personal loan earlier, you can get some extra funds through an overdraft on your ongoing loan. An overdraft facility can be issued to the person, who has an existing loan and has a good repayment history. As the overdraft loan is a multi-purpose loan, it can be utilized for business purposes as well. Moreover, an overdraft loan is disbursed quicker in comparison to any other loan, as the documents are already deposited.
Angel investors are individuals who proffer funds to startups and new business firms, usually in return for convertible debt or equity holding. Angel investors usually work independently by giving off their surplus money. If an Angel investor sees potential in your business idea and feels it can give good profits in the recent future, he may invest in your business. The loan amount isn’t to be returned to the investor, but a percentage of shares of the business will be transferred to them.
Contrary to an angel investor, Crowdfunding involves a group of people, who invests in your business. It needn’t be that these investors have surplus money to put into your business, instead, they invest their savings to earn a better return from a business rather than keeping idle money in bank accounts. Various websites can be checked for availing crowdfunding. The advantage of crowdfunding is that along with the fund, a market for your business is also structured. When a large number of people get associated, they can become an asset to your business. As in Angel funding, you have to give some percentage of your business shares or some percentage of profit.
The government of India launched the scheme of ‘Startup India’, which offers financial aid to new and upcoming businesses. The ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited (MUDRA)’ provides substantial support to the SMEs. Up to Rs. 10 lakhs of monetary support is put forward under this scheme.
Often new business or startups are unable to clear the eligibility criteria by the traditional banks, this is when one can take the help of Fintech lenders. The new business is provided with an online business loan which is also collateral-free. The fin-tech lenders are often not too stringent regarding the terms and conditions, which is why the business loan rates by the fin-tech lenders are comparatively higher to the banks and traditional lenders.
A personal loan is an unsecured, multipurpose loan. Though it comes with a higher interest rate, if you are eligible for the loan, you can get it instantly. A personal loan should be kept as the last resort for funding, if no other options have worked out.