• Despite the economic recession and money becoming increasingly scarce, small business funding is still possible for the businessman if he knows where and how to obtain it.
  • An entrepreneur should explore the possibility of self-funding his business by funding a part of the personal savings, instead of searching for the outside lending agencies.

Options for Business Loan during a Slow Economy

Mortgage Personal Assets

  • Assuming that the borrower is not able to do self-funding for whatever reasons. He must examine the second-best option that is
    • Borrowing money offering as a collateral of the personal assets like
      • Property
      • Stocks, or
      • Bonds. If he can, the personal assets can serve as collateral for better loan terms.

Using Credit Cards

  • Credit card funding is considered as a viable option.
  • Many businesses are thus resorting to this kind of funding method.
  • One would have to do some research as some credit cards actually charge a low interest if the money is for funding of the small businesses.
  • One should be clear about the terms and the rate of the loan. The borrower must take a look at
    • The duration
    • The repayment plans
    • The confidentiality agreement, and
    • All the other additional fee details.

Small Business Association (SBA)

  • One can contact the Small Business Association (SBA) or their associated agencies like
    • The Small Business Development Centers (SBDC). To ascertain if there are any kind of government-guaranteed loans that apply to the type of business.
  • These types of loans are considered as very fast approval and funding options.
  • One would typically know the status of his loan application within two days of applying for an SBA loan.

Bank Loans

  • One can also inquire with the local banks to see if they offer small business loans.
  • However, local banks are generally in favor of funding small businesses.
  • It helps to increase their client base.
  • If any of the local banks are willing to fund the small business, one should make them his priority because the rates and terms would be good.


  • If the borrower is not averse to convert his small business into a partnership company, one can thus his business partner to partially fund the business.
  • One must be willing to share the business profits in a mutually acceptable way.
  • However, this should be one of the last options that the borrower should take because he would have to forfeit his absolute ownership of the business.

The borrower should make a list of all of the possible small business funding options and then he should prioritize them in a manner he deems fit. Starting first with the highest priority option which he can explore thoroughly each one of the options sequentially. Regardless of which option he finally chooses, he would have to spend a lot of time and do some in-depth research before he decides the right source for his small business funding.

What are the funding options?

  • We can ourselves spot a huge number of businesses that have become blockbuster hits with the people and millions are using their services.
  • Their valuation is in millions and billions of dollars but they do not have even a pennyworth of profits in their balance sheets. How is it so?
  • The answer to the above question is, “funding”.
  • The start-ups would not have been the same as they are today if it would not have been due to huge amounts of money infused in this business by various sources which we are going to know later.
  • It is due to these funds that ventures have sufficient working capital and able to expand to places they have never reached out before.
  • But investing in new business comes with a risk attached to it. The borrower can choose between the business loan and mortgage loan.

Family and friends

  • In the initial periods of your venture, you can finance your business by using your own personal finances.
  • You can use your savings and fixed deposits and once the personal financing dries up you can look towards
    • Family members
    • Friends, and
    • Other relatives.
  • The funding from these sources is flexible in repayment and can sustain your business depending upon the size of the venture. They can be the alternatives to a business loan to avoid the burden.

Bank Loans

  • Bank loans are conventional sources of funding.
  • A loan from a bank or any other commercial institution requires a strong financial situation.
  • To get a conventional business loan, the business owner will need to show
    • A detailed business plan
    • Returns, and
    • Profits that have been previously incurred and a bank will give out a loan. Only if it believes that your business is capable of making that steady stream of profit in the future.

Government Programmes

  • The Central and State Governments in India issue funds for entrepreneurs to run their businesses.
  • MSME, (Ministry of Small and Medium Enterprises) provides funds for ventures which meet its criteria and appeal to the board.
  • The donations and loans may be anywhere up to 1 crore.
  • So, in case you do not want to share your business with anyone in return for your capital, you can always reach out to the government.

Crowd Funding

  • In case you are out of cash but you have a strong appeal to the social space, you can launch a crowdfunding campaign in which people who relate to your product can give out donations.
  • Several sites help you launch a successful campaign.
  • With this, you can practically ask any person to fund your purpose and various ventures have had huge amounts of capital infusion by this process.

Angel Investors

  • An angel investor is a high net worth individual who lends money in return for an ownership stake in the venture.
  • These people invest in only those companies who they consider have a wide scope in the future and wish to go public.
  • Most angel investors look for a viable business with an awesome business plan and equally capable management to run that business.
  • Angel investors are the reason many start-ups you see today are running. You can also go for the co-applicant for a business loan.

Venture Capitalists

  • Venture capitalists are a group of highly rich individuals that manage the wealth of those rich people.
  • A venture capitalist is similar to an angel investor. They look for the same criteria that match with the angel investor. And demand an ownership stake in return for their investments.

Business houses and startup incubators

  • A serious entrepreneur may look forward to business houses. And start-up incubators which are cash-rich organizations that look for those businesses that have a market in the future. They are very particular about their investments.
  • They are similar to angel investors and venture capitalists in their funding process and have more or less the same conditions.

All the above options are viable for an individual or a venture who seeks capital for the efficient working of their firm. It’s just that they come with a disclaimer attached and you need to be the very best at what you do and believe in what you are working on.

Through financial Institution

  • Online Seller Finance is a quick fix for all of your online business financial requirements. Online Seller Finance has a fast and easy loan application procedure as compared to all the other business loans.
  • The maximum loan amount which any borrower can ask for online seller finance is twice of the monthly sales whereas financial institution offers the e-commerce founders loan up to Rs.1 crore.
  • All the depends upon the monthly sales of your online business and the term of the loan is from 90-180 days.
  • There are however many websites that provide online seller finance but we at LegalRaasta provide you with online seller finance easily and without any complications.
  • Applying for the business loan through a financial institution provides the borrower certain advantages. There are no early settlement fees.
  • Financial solutions are customized and flexible. Also, there is one more advantage that the line can be increased as your company grows.
  • Some of the minimum requirements that are required to be fulfilled to get online seller finance are that the annual turnover should be Rs.25000/- Quarter. There must be some minimum credit score and the time in business must be at least 12 months.

Steps apply for the business loan online

Step 1

  • Before applying for online seller finance through financial institutions the borrower is supposed to check if he qualifies for the loan or not.
  • A simple form in which details such as
  • Name
  • The loan amount
  • E-mail
  • Mobile number
  • The type of loans, and
  • The loan tenure is to be filled to check eligibility.

Step 2

  • To qualify for online seller finance, the business should be minimum registered and it must in operation for 6 months.
  • Also, the fact that the business should be selling on any one of the E-commerce platforms.
  • The sales volume per month should be approx. 2 lakhs.
  • Once it is seen that the borrower qualifies the eligibility financial institution would make contact with you.
  • The applicant needs to submit some details related to the business loan such as
    • The annual turnover of the company
    • Credit score, etc.

Step 3

  • The borrower is then required to send some of the documents
    • Bank statement
    • Aadhaar card/passport
    • PAN card, and
    • Latest income tax return.

Step 4

The financial institution like LegalRaasta coordinates with 30 + banks and NBFC’s to get the application for business loans approved. They try to get you the best rates and normally the interest rate is 1% per month. Once you are done with all the formalities and your loan is approved, the amount will be credited to the borrower’s account.