Independent businesses including small and medium enterprises are the key driving force in the Indian economy. A total of 48 million SMEs make India the 2nd largest nation with such enterprises. They contribute to 45% of the country’s total manufacturing output and 40% of total exports.
Experts predict these numbers to further increase in the next decade thanks to growing demand and easy availability of business finance. Various financial institutions including NBFCs offer credits to companies to help them lay a solid foundation for their expansion. Enterprises can boost their capital, pay for daily overhead costs, and even help create a growth plan for small businesses with such additional funds.
Planning finances to grow your business
Successful business growth depends mainly on sound financial planning. These involve plans to manage its seed capital, daily cash flow, earned revenue, overhead costs, tax, etc. Let’s take a look at the various aspects.
- Managing the seed capital – Seed capital is the initial investment done to form a company. It provides the basis for all operations of a business and is generally funded by the owner and partners.
Seed capital is essential to cover the initial expenses of a company and to provide a financial base to run its operations. It increases as the business grows or when the owner takes an advance in the form of an unsecured business loan.
Proper management of such funds is vital for business growth. An enterprise should periodically invest a part of its revenue to increase its seed capital. It provides more funding for various costs involved in business growth.
- Defining business model – A well-defined business model is essential to streamline your business finance and facilitate its growth. It spells out the short and long-term objectives of an enterprise and helps plan accordingly.
Furthermore, it is easier to secure finances in the form of an advance if you have a robust business plan. Lenders prefer borrowers who can show a clear structure of their business and how they plan to continually meet the market requirements. They might also query how one plans to utilise the funds taken as a business loan. Providing a sound business strategy and growth plan can help you avail credits to boost your business’ finances to assist its growth.
- Securing the cash flow – A business’ cash flow involves its generated revenue as well as various outbound cash flows like employee salary, rent, cost of various amenities, etc. It is necessary to secure both the inbound and outbound cash flow to manage business finance and aid its growth.
Managing your company’s cash flow help structure its finances and save a significant amount of money to invest in its growth. Experts account it as one of the best tips to organise your business.
Start with finding its revenue streams. Improve its monthly income by concentrating on clients and partners that bring in the most significant returns. It will help you streamline your business’ income and eliminate any loss incurring elements.
- Reducing overheads – Overhead expenses are a critical part of business finance. These include everything from utility bills, to salary for the employees. However, various non-essential expenses often put excessive strain on a business’s finance. Reducing such overheads can help streamline the finances of an organisation. That amount can be reinvested to the business capital to aid in financing its growth.
- Taxation – Following proper taxation procedures is of crucial importance to facilitate a business’s growth. Not only is it necessary to run an organisation according to the law, but it is also essential if you want to avail a loan for your business. Most financial institutions require income tax returns of the last year to process an advance.
- Contingency funds – Very few businesses enjoy a steady flow of revenue throughout the year. It is essential that you maintain a contingency fund to meet any financial deficit when revenue is low. It is an integral part of planning finances for your business growth.
You can save a certain amount from your revenue every year to create an emergency fund. Alternatively, a business loan can provide the necessary resources to accumulate the funds or provide necessary capital to overcome the financial hurdle.
The large loan amount is ideal to create a base with which you can start saving up for the emergency fund. Financial institutions like Bajaj Finserv offer loan amounts of up to Rs. 30 Lakh as business loans which can be utilised to cater to your organisations’ needs.
Careful financial planning is an essential part of business growth. It helps create a stable platform for your venture to start its growth and protect it from any unforeseen incident or difficulty your business might be facing.