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Entrepreneurship is as essential for job creation and economic growth as for the overall development of a country. India is no exception; as a matter of fact, India is the second most entrepreneurial country, overtaking economic powerhouses such as Germany, United States, etc.
- A 2019 audit places India second on the global entrepreneurial scale, only after Chile. India scored 69 depending on its various settings, and typically the booming start-up culture.
A business-friendly mindset, several Government-aided programs, and availability of customized funding options like channel financing from various sources helped the nation achieve the coveted position. Another data on entrepreneurship in India indicated a substantial growth in the number of new firm creation from 2014 to 2019-2020.
A large number of first-time entrepreneurs are learning how to be a successful business owner and promoting their organization to new heights.
- The growth rate of new firms in the formal sector touched 12.2% between 2014 and 2018, from only 3.8% from 2006 to 2014. This is a welcome improvement in the nation’s entrepreneurial journey.
Unfortunately, these studies also reveal that India has a significantly lower number of formal entrepreneurship when compared to other countries, especially on a per-capita basis. A majority of it relates to the availability of business finance. Being informed of some crucial financing terms can thus drive business expansion for many entrepreneurial ventures.
Financing terms that can empower India’s entrepreneurial expansion
One of the significant issues that plague India’s entrepreneurial growth is a poor understanding of several business-related factors and terminologies. There are several basic terms that every good business owner should know.
- Channel financing – Channel financing is a funding mechanism whereby a financial institution fulfills the monetary requirements at the supplier’s end rather than providing funds to a business. It offers several benefits, including the immediate realization of sales proceeds and helps keep liquidity constraints at bay. Such suppliers and distributors repay the credit over a period that equals the tenor of a loan, allowing better liquidity management.
Several financial institutions offer channel financing, including companies like Bajaj Finserv. They also provide business loans to eligible applicants. These short-term, unsecured credits play a crucial role in providing urgent financial backing to organizations.
Such credits are offered with several borrower-centric features and benefits, including pre-approved offers for existing customers. These offers streamline the online application process and reduce the time involved. You check your pre-approved offer online by sharing only some essential details.
- Invoice financing – There are several ways in which businesses cater to immediate financial requirements. Invoice financing is one such common method. It is a financing tool through which funds are allocated based on unpaid invoices only, to mitigate the short-term liquidity needs of an organization.
Borrowers do not have to wait for accounts receivables due dates, which significantly reduces the overall time taken. Lenders can disburse as much as 75% of the invoice value, which allows better financial management on behalf of the organizations. It is among the common options for financing a small business. The financing option can help free an organization’s working capital, which can be allocated for better management of inventory, payroll, and other essential operating expenses.
- Corporate financing – It refers to various funding tools that help raise capital for establishment, development and acquisition of a business. It also includes several different methods used in proper resource utilization and reduction in expenditures.
Usually, such financing includes four primary aspects, i.e., monitoring, raising funds, investing, and planning finances.
Understanding these details helps entrepreneurs acquire the necessary financial skills that every business owner must-have. It also allows for more effective operations management alongside helping overcome any financial shortcomings a business might face.
Summary
India is one of the fastest-growing entrepreneurial countries in the world, second to only Chile, according to a global study conducted in 2019. Such tremendous growth was made possible because of various factors, including a fast-driven start-up culture and the availability of finance in the form of channel financing, business loan, etc.
However, despite the availability of finance, poor understanding of several organizational and managerial aspects still hold back the nation’s industries. Despite being the second most entrepreneurial country in the world, India suffers from weak formal entrepreneurship on a per-capita basis. It can be suitably corrected through proper training, where future business owners are taught the ins-and-outs of running a successful organization as well as necessary financing aspects.
Financing for businesses comes in several forms. Lenders can disburse the sum directly to an organization in the form of business loans. Borrowers can also opt to avail of invoice or channel funding, especially if they need assistance only regarding short-term expenditures. Understanding these terms will help entrepreneurs secure necessary financial assistance, whenever required.
