So, you have finally made up your mind to break the invisible chain that was tying you up with the office chair of 9 to 5 job. Such decisions need a lot of courage and careful consideration to come out of the comfort of the office environment and getting into streets with your small retail business.
In India, the number of retail business is really high. As the investment required here is comparatively low, starting a retail business seem to be easier. But the reality is slightly different from the outer look of retail businesses. The complexity of starting a retail business can be measured only once you step your feet into it. There are a number of challenges one has to overcome in order to make your retail business an established one.
The first ever challenge one has to face is financing. It is the money which is needed each and every step of starting as well as running a business. The secret of any successful business is the innovative ideas fueled by an adequate fund. So, if you have an abundance of business ideas for your retail business and wondering how to get the fund to execute it in your new business then here we got the answer for you.
Getting a traditional business loan for starting a retail business is near to impossible. As a traditional business loan requires past performance report of the business hence it is not worth trying for traditional business loans. But a business loan is not the only way to get financial help for business. Here we have picked up a few alternatives of business for a retail business.
5 Methods to avail Financing for Small Business
A personal loan is such a financing option which can help you in all kinds of financial needs including setting up your business. A personal loan is a secured loan hence using the personal loan amount for business can be a good use of a personal loan. Personal loans are unsecured loans. So none of your valuables is needed to put in risk for getting the approval of the loan. Moreover, you can keep the loan tenure for 5 years which in turn will make the EMI smaller.
Home Equity Loan
One can take a Home Equity Loan by keeping the equity or share of his/her home as collateral even when the home is under a home loan and the repayment is in progress. A home equity loan is a Second Mortgage Loan. The “first” mortgage is your home loan with which you purchased your home. But you can still take an additional loan against your share in that same property. A home equity loan is a secured and multipurpose loan, hence it can be a good financing option for starting a retail business.
Business Lines of Credit
A business line of credit is a revolving credit which works similar to a credit card. This is an agreement between the lending institution and the individual where the lender assures the individual to lend a certain amount of money. Unlike a traditional business loan where the loan is disbursed at once, here the borrower can withdraw the loan amount in small parts whenever there is a need. The borrower has to pay interest only on the amount that has been withdrawn, not the whole granted amount. The borrower can maintain the balance by repaying the amount that has been withdrawn. A borrower can access fund from the line of credit as long as the maximum amount doesn’t exceed. A borrower should make the minimum payments every month to avoid paying a higher interest rate. A business line of credit is generally used for longer durations like 10 to 15 years. Hence with a better withdrawal and repayment facility, you can opt for a business loan of credit as a source of business funding.
An equipment loan is a secured loan which is similar to a car loan. An equipment financing loan helps businesses financially to own equipment for the business. One can buy any kind of instrument needed for business with the help of equipment loans. An equipment loan is self-secured as the equipment you purchase itself serves as the security of the loan. But you are to keep in mind that even if the equipment shows any malfunction, you will have to continue to pay the loan.
Angel investors are individuals with an extra fund and want to invest in small businesses for better returns. Most of the angel investors are generally successful business persons. Sometimes angel investors invest in small businesses with an intention to encourage them. Finding an angel investor is really difficult. Though there are some online portals which may make you get connected with angel investors, angel investors are rare to find. The return of the financing through angel investing never happens in EMIs. The investor will have a share in the profit of the business. By investing in small businesses, the angel investors buy shares of a business.