Top 5 Ways for Businesses to Raise Working Capital
Investing to expand your business has its own set of risks, opportunities, and obstacles attached. Small businesses come with massive concern for accumulating adequate working capital for smooth business operations. For every business, its initial phase is crucial, and for it to keep going and acquire momentum, quick business funding is necessary. The interest rate of such loans depends upon different factors such as the kind of lending authority, business type, market trends, credit rating, and loan amount your business requires.
Check out crucial business working capital loans, and you must consider availing yourself of your business.
Angel investors are influencers who look to invest in a company that they consider has the potential to become profitable in the upcoming times. However, consider equipping yourself with an intensive business plan before you approach an angel investor.
Working capital loan
Small businesses take up such loans to mitigate the short-term requirements of liquid cash. When there is a requirement for cash shortage for regular operations, working capital loans can be highly resourceful. Business financing is granted for up to 7 years repayment tenure for processing charges of up 3 percent of the loan amount and interest rate based on the credit risk examination of the business.
Invoice and equipment loan
An invoice loan is generally considered as a means for raising capital based on the time difference between invoice raising and receiving of the payments from customers. Invoice loans assist businesses to ease cash flow, reinvest in operations, pay suppliers and employees much before they could have if they waited for the customers to make the payment in full.
An equipment loan is mainly for the business that deals in the manufacturing sector. Banks provide specialized small business loans for buying costly and essential equipment, which can go as high as Rs 25 crore. However, few banks also provide up to Rs 100 crore. Duration of such loans goes up to 4-5 years with a lower rate of interest wherein equipment is considered security and other additional collateral.
Crowdfunding and cloud funding
Crowdfunding refers to a group of small companies that assists business ideas to reach out to different prospective investors via distinct platforms. Such investments can be based on either equity or debt. Few crowdfunding sites also provide rewards in exchange for assets. Crowdfunding endows an opportunity to reach out to various investors in place of seeking just one prominent investor.
Cloud funding is a medium of financing your business via the internet by various investor groups that allow you to pitch your business ideas.
Venture capital and partners
Strategic partners for business can come across as a good source for raising capital because they align their resources to help your business. Such partners also have the choice to become company employees. Venture capital, on the contrary, is firms that cater to small business financing for initial business stages. However, they seek comparatively higher investments and hold a controlling role in your company. Such firms generally invest against equities and make exits whenever there is any acquisition. Also, they provide mentoring services and examine the company for its sustainability.
No matter whether it is a startup, a seasoned business, or a serial entrepreneur, each venture needs funds in the form of working capital at the beginning phase and during the operational stages. Though many companies are bootstrapped, to start with, there is a continuous requirement for funds to mitigate the venture needs. The above 5 ways can help you raise adequate working capital for your business.