Free financing for small business

Financing for the small business means various financial options for the commissioning & running of the small business (traditional and non-traditional) by the individuals,cooperative societies, small institutions etc. Actually small business financing has become important with the diversification of the small businesses and the enhanced requirements of the funds for such businesses.

Types

Depending upon the ownership types, there are three types of financing options for small business:

1) Self Financing:

The finance which is pushed in by the enterprisers from its own resources viz., past savings, earlier profits etc. is called self-financing.

2)Group Financing:

The finance which is brought into the business collectively by the group of individuals either under cooperative forms or under small proprietorship is called group financing.

3)External Borrowings:

The external borrowings of finance means borrowings of the funds by the enterprisers from the external sources of lending such as banks, insurance companies, financial institutions, foreign institutional institutions, individuals, friends, relatives etc.

Scope and Growth:

Actually one questions always arises in front of a small business enterpriser i.e., selection of an appropriate financing option for his/her business. With the increasing commercialization of the businesses and economies worldwide, there are several types of external borrowings schemes available for the small business owners. Some of them are Short-term loans, Loans on installments, Mortgages Loans, Shopkeeper's Insurance policy, long-term loans by the state owned Banks etc.

Short term loans means loans or credits sanctioned to the borrowers for the specific short span period viz., 6 months to 2 years. Actually all the small business owners especially those involved into the household businesses like spices, Bakery,Cakes, embroidery, Shawls, carpets manufacturing etc. needs short term loans for the purchase of the raw materials and meeting out the daily expenses like electricity Charges, telephone bills etc.

Loans on installments means loans disbursed among the enterprisers with the options for repayment of the loans into several phases called installments. However rates of interests on the installment loans is comparatively higher than those applicable on loans with one time repayment option.

Mortgages loans is the loans credited to the enterprisers against mortgaging the properties (movable or immovable) of the enterprisers. Mortgaging of properties means keeping the papers or valuables into the custody of the creditors; which has value equivalent to the amount of the loans sanctioned to the enterprisers. The mortgages properties are returned back to the borrowers after he/she successfully repays the loans to the creditors in the stipulated time period.

Shopkeeper's insurance policy is the policy being run by the various insurance companies for the benefits of the shop owners such as Dairy owners, mobile repairing centers, TVs, variety stores, motorcycles shops etc. Such insurance is necessary for the small shop owners for guard against the unpleasant happenings such as fires, theft etc. in the shops.Any shop owners small or big can apply or such scheme. However they will have to pay a fixed amount of fees called premiums to the insurance companies. According to these schemes, affected insured shop owners are given compensations by the insurance companies, which may be equivalent upto the amount of the damaged properties.

Long-term loans are loans given to the business owners for the long duration ranging from 2 years to 10 years. Actually governments in the developing countries announces financial packages for the various sections of the small business enterprisers such as weavers, potters, Craftsmen, Small shops owners etc. from time to time. These packages includes long term loans by the state owned banks, insurance companies to the specific class on easy interest rates as well as waivers? of some portion or all of the loan amounts given to such people or cooperatives in the past. Among the all options of small business financing, external borrowings and self-financing are the most suitable options.

In the year 2003-2004, total loans disbursed by the Banks, financial institutions etc. in USA amounts to $3300 millions. Also people here due to the higher purchasing power,invest into their business mostly from their own internal resources.

With the innovation of the newer banking techniques such as Loans by Credit cards, debits cards, unsecured business loans, commercial vehicles insurance etc.; people are adopting for these options rapidly.

A challenge to small business owners trying to grow their businesses or brands is financing any changes, additions or purchases they need to make. Often, small business owners do not have property for mortgaging while seeking for the loan. Working capital can be difficult to obtain using traditional loan sources.

In these cases, an unsecured small business loan or financing may be the best option for the enterprisers to meet their overall business needs and objectives. A small business owner can seek unsecured small business loan for financing their business based on their past track records on loan repayment, reputation in the market or anticipated future sales.Till now, a business owner has to mortgage some property to the Banks for getting loans. Now, unsecured loans or bad debts loans are becoming more popular in the USA and the European countries. Many Banks and financial institutions are giving loans to those individuals too who are loans defaulters. However, these individuals have to follow the Specific rules and regulations of the banks for availing such loan facility.

Conclusion:

Small businesses are the principal mode of livelihoods to the millions of people throughout the world. In developing countries, small businesses are next to the agriculture as a means of earnings. However, small business is influenced by The various factors like no. of competitors in the fray, present and anticipated sales of the goods and the services, prices of the raw materials, labour costs, depreciation costs of machinery, government excise and sales tax duties, people's tastes, preferences, purchasing power etc. Therefore due to adverse impact of any of these factors, business enterprisers may have to suffer losses. This also affects their future business expansion plans as small business owners mostly from middle and low-income group,cannot approach to the banks for the further loans. Also in any business fields, there is no certainty that the individuals may do well in the particular business.Therefore, Central Bank of any country should make more flexible credit policy which addresses the problems of small business enterprisers.

Other Articles

your rating is poor then repair your rating before applying for the loan.
financial balance would be easily maintained between the cash inflows and outflows.
advisable to take your time, and weigh all factors carefully.