There are many ways how a business can avail small business loans at the time of need.
However, there are very limited options of loans for self-employed when they need extra funds for their business.
And the need for funds is mostly at the initial stage of the business, once the business stands on its feet and it starts functioning. There can be a working capital crisis. Until the business reaches the stage where it starts generating and earning a good profit, there is a need to fuel the business with an adequate amount of money.
Availing a business loan from traditional lenders such as a bank may seem more challenging. Mostly, due to their stringent eligibility criteria and documents requirements.
Also, their loan approval and disbursal process are very long. And the chances of approval are also very thin. Such situations leave self-employed entrepreneurs with no hopes. Now, as a relief for them, there are several ways of collecting funds for small business in India. Read on to know about them.
If the self-employed has some funds in his bank account, he can make the best use of them by investing in the business at the time of need. This type of financing or investing is called bootstrapping. However, most business owners generally invest their savings at the initial stage when the business is just started.
Banks also offer an overdraft facility, i.e. the business owner can avail extra funds by taking this facility. However, this service is offered to the individuals who are already running on a loan with the bank. And also has a good repayment history plus CIBIL score. Overdraft facility is a multipurpose loan that can be used for any purpose. However, you can use them for business as well.
Angel investors are the investors who are high in net worth and invest it on surplus money. There are several websites which help in finding angel investors. They all work individually. If they are happy with your business idea and feel it has the potential to earn good profits in the coming days, they may invest their money in your business. The loan availed from them can be repaid in EMIs. However, some business shares will be transferred to them. And as the business will grow, the profit will be shared.
A personal loan for self-employed can also be availed for the business. As said earlier, business loan eligibility and document requirement for banks are stringent. So, one can take help from FinTech lenders such as NBFCs. FinTech lenders offer collateral-free business loans online at minimal documentation and basic eligibility criteria. Also, their terms and conditions are very lenient and customer-friendly as compared to banks. Also, they offer an online loan application and the documents can also be submitted online.
Now that you various platforms for availing loans for self-employed, you can make a sound and well-informed choice. Having said that, you need to first ascertain your needs and then only apply for the loan.