A business is nothing without financing. Be it Amazon, SalesForce, or Infosys – better financing means better functioning. But thanks to the implementation of lockdown due to Covid-19, businesses had a really tough time continuing their operations as many economies underwent recession.
While developed economies like the United States of America, Canada, and Europe didn’t have to suffer much, it was mainly the developing and under-developed economies like India that faced a huge economical crisis due to the pandemic.
However, as per stats, with 0.4% of GDP growth in the 3rd quarter, India is no longer facing a recession. Yet, there is no hiding the fact that it will still take India and other such economies a lot of time to get back to normal. So, how can the businesses functioning in such slow economies continue to finance themselves? Let’s see:
Micro Lending Agencies
If yours is a small business that is just at the grass-roots level and in an urgent need of funds to continue with the business operations, a Micro Lending Agency is the first thing you should look for.
Such agencies provide rapid loans to businesses, especially small and micro, at a really low-interest rate. This ensures that your burden to pay interest is low. Besides providing loans, they also deliver certain counseling services to businesses at a very low cost.
So, if you wish to seek professional advice on marketing, selling, financing, and other niches, resort to a Micro Lending Agency to help you with that. In other news, you can also seek such advice from the industry experts like Canny Group.
Line Of Credit
Line of Credit is yet another trusted source of raising finance when times are adverse in the economy. Many businesses have claimed to raise funds through Line of Credit because it is a simple yet effective and quick way of doing so.
If your business is in need of funds, especially to manage its cash flows, then the Line of Credit is the first option that you should use. Here, the lender fixes a given sum of amount as the upper limit of the loan and the borrower can lend any amount within the premises of the fixed upper limit.
The best part? Interest is only charged on the amount of money actually borrowed by the business and not on the entire amount!
Making it to number three of our list is Invoice Factoring. Again, one of the simplest and renowned methods of raising finance, particularly when you need to manage the working capital.
Invoice factoring involves discounting the accounts receivable of a business to any financial institution, also commonly known as a factor. In simple words, it implies selling the accounts receivables to a Bank in lieu of funds.
But the catch here is that your business will not be able to raise the entire amount. The bank will only provide you with, say, 60% or 70%, of the total bill amount. Once you have recovered the invoice from the customer, your business will receive the remaining amount.
However, for this entire service, the factors charge just a small amount as a fee. Easy, right?
Merchant Cash Advance
As the name suggests, Merchant Cash Advance is an amazing way for small businesses to keep their finances on point even in times of crisis.
Upon going for this method, your business will receive a lump sum amount in cash in return for a pre-agreed percentage of future credit or debit card sales. But the only setback here is that it is quite an expensive method as the APRs sometimes go as high as 350%!
Last but never least, the evergreen method of raising finance for business in certainly any faze of the economy is by raising equity shares.
Safe, secure, and trusted, no wonder why even in times of heavy recession across countries like India, fund issues via equity jumped 28% during the first half of the financial year 2020-21! So, no matter how intense the need for funds is, rely on your equity to meet it.
Over to you…
In a slow economy, it becomes really tough for a business to raise funds, owing to obvious reasons. Here, we stated 5 super amazing ways to finance your business in a slow economy. Follow this article and run your business smoothly.