Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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A good crisis should never be wasted. 2020 has forced many to take up entrepreneurship to earn their daily bread and butter.  However, finding the right sources of dependable financing can be a daunting task. It can perhaps be the difference maker between business success, mediocrity or even failure.

So, even though you may have a viable business idea but a lack of information about financing options has stopped you from fulfilling your business goals. While approaching a bank or financial institution is easy, poor credit histories, insufficient collateral, and an unsteady source of income can act as barriers to getting that loan. It is here that these alternate sources of financing may just be the panacea that you are looking for.

Business Incubators

The idea of having enough money and the time to pursue one’s interests is what drives many. It is a compelling idea to have the resources to fulfil one’s dreams, but isn’t the path towards entrepreneurship fraught with risk? Having a good mentor or mentors can help give a kickstart to your business, especially in the critical early stages.  This is precisely the idea behind business incubators.

These are organizations that help start-ups with ready made resources and guidance to set shop: Resources include computers, office space, conference rooms, internet connection, and a support as well as administrative jobs. Apart from this, start-ups can also leverage the know-how of experienced mentors to establish their business. The government plans to open 100 innovation zones in urban local bodies, and seven research parks to help the startups grow.

Vendor Financing

Managing cash-flow is a big challenge for start-ups, especially in the initial stages of the business. An inadequate cash-flow can significantly hinder business performance and its ability to respond to market disruptions. Instead of conventional sources of financing, suppliers can be approached for a loan to ensure business continuity. After all, your suppliers have, in a sense, a stake in the success of your business.  However, a loan from a vendor is more likely if he or she is familiar with your business and expects it to flourish in the near future.

Usually, organizations who opt for such loans may not be very credit worthy, and suppliers are likely to offer loans at much higher interest rates than that of bank loans.  It is an option worth considering if your business is in a high growth sector.

Crowd-sourcing

Crowdfunding platforms can be directly approached by start-ups to raise the necessary capital for their business.  Also, with donation-based crowdfunding, entrepreneurs can do away with the headache of high interest rates and stringent repayment schedules.  People who donate also become stakeholders.

Apart from this, an effective crowdfunding campaign can help introduce a venture’s overall mission and vision to the market, as it is a free and easy way to reach numerous channels. Crowdfunding platforms can lead to thousands or millions of visits from potential users who can also advocate your business to the masses. It can inadvertently serve as a cost-effective means for viral marketing.

The road ahead

The Startup India portal highlights that the number of startups has increased to 39,114 on November 3, 2020 from 24,927 startups in the same period in 2019. A recent business today story highlights that India has the 3rd largest start-up ecosystem and is home to more than 21 unicorns. Moreover, several government and private initiated mentorship programs are unfolding progressively as leaders from all sectors want to show their support and contribute actively to the Atmanirbhar Bharat mission that is expected to spur India’s economic resurgence.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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