Start-ups & their Funding Issues

Financial stability is one of the most important things needed for any business. Cash flow is important to maintain else the businesses will not be able to maintain its demand and supply ratio. But to maintain this cash flow, entrepreneurs have to face a lot of problems. 

Well, Small and medium enterprises have made a noticeable difference in improving the country’s economy by employing a large number of population. SMEs have contributed a lot to the growth of industrialization but still, business owners have to face multiple challenges in arranging funds. Overcoming these challenges and arranging funds seems to be the biggest hurdle which restricts entrepreneurs from growing.

Here are some of the common challenges that an Entrepreneur faces while availing a Business Loan, especially the start-up.

Challenges Entrepreneur Faces while availing a Business Loan

Guarantee Prerequisites 

Even though the Ministry of Small and Medium Enterprises, the RBI has endeavoured to capital financing, entrepreneurs keep on confronting difficulties when looking for credit. Normally, money related establishments, for example, banks, request insurance or conventional security from business advance candidates. Most business people, given the size and their neighbourhood nearness, can’t offer insurance, in this manner neglecting to verify the credit expected to extend their organizations. 

In such a manner, an unsecured business loan from NBFCs or banks can be utilized to meet the particular needs of business visionaries and entrepreneurs. It offers business advances online with no commitment, hence guaranteeing the credits are unbound. Apply for a business loan with finance Buddha get offers which suits your requirements.

Managing Cash Flow

One of the biggest challenges for entrepreneurs is to maintain the cash flow for the smooth functioning of the business. Being regardless of the profits your business makes, there should be sufficient funds for the business. A business owner should have an approximate budget and plan for his/her business in the starting of the month. If you don’t have sufficient funds even for some months to run your business, you are really in a difficult situation. 

To avoid such a situation one should plan their business in advance, and if there is any requirement of funds they should start looking for it in advance. So, their business doesn’t get affected.

Inability to Assess Required Fund 

For SMEs the fund requirement is small as their budget is low, lending institutions find it unprofitable to lend a small amount. Moreover, while lending to SME lenders are at more risk comparatively as they are not sure about the repayment. All this makes it difficult for entrepreneurs to access the required funds. To avoid such situation a business owner to consider government launched schemes to provide financial support to their business.

By opting for government schemes one can save on a lot of taxes as well as the interest rate charged for borrowing is always low.

A Lengthy Loan Approval Process

Banks, business loan approval period is too lengthy, they take an extended period to process and sanction a business loan application. The time taken to a loan for a business can be crucial and it is determined on several things, which includes- your personal profile, your business profile, your business plan, credit ratings and your capacity to repay the loan.

Apart from this, loan approval is also determined on the profit or loss involved to the bank. All this makes the loan approval process, which can take even months to approve a business loan. Hence, this lengthy process is also one among the challenges which a business owner has to face in India.

Absence of a Detailed Business Plan 

To be successful in any business you need a well-defined business plan. The plan should include all the estimated expenses such as your staff salary, rent of the outlet, factory, inventory purchase cost and should outline the scalability, market size, competition, product development, marketing strategy, cost competitiveness, management bandwidth, and overall strategy road map. A perfect business plan is one which not only shows hope of profit but should also include the risk factors involved and losses which can happen in the worst case. These are the requirements to be included while preparing a business plan. Unfortunately, some business owners forget to include these points in their business plan which results in rejection of their business loan application. As all lenders check for the business plan before approving any business loan application, and if they are not satisfied with it, they reject it.

These are some of the common challenges an entrepreneur’s faces while availing a business loan in India. Knowing the common challenges can help you find the most suitable solutions for the challenges in advance, and will help you to achieve success without any failure. 

Knowing the challenges in advance try to be prepared with the solutions in advance and you will be on the way to being successful itself.