What financing options are available for retail businesses?

Indian entrepreneurs in retail have a number of financing options available to meet their business operating needs and expansion options. The type of financing available to retailers is based on their needs, stage and scale as well as business specifics.

Usually financing options involve:

• Business Loans: Unsecured loans available from banks and financial institutions for the purpose of business to manage working capital, buy inventory, renovate or expand the store.
• Lines of Credit: The retailer may also have credit facility available on a flexible basis that allows retailers to withdraw cash as needed and pay interest only on the money borrowed.
• Loan Against Property: Secured loans that retail businesses may obtain, however the commercial or residential property owned will need to be pledged as collateral.
• Government Schemes: Retailers may obtain loans through various government schemes; Pradhan Mantri Mudra Yojana (PMMY), Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Fund Trust for Micro and Small Enterprises, and Stand-Up India Schemes. Government schemes also offer fulfilment and attractive loan options coupled with simplified loan processing for small businesses.
• Personal Loans: Retailers can use personal loans for business purposes, particularly if they have no other collateral for securing a loan.
• Angel Funding and Crowdfunding: Retailers looking to grow quickly may have the option of accessing capital through angel investors, and crowdfunding options.
• Other options: Retailers may also use invoice financing, business overdraft for working capital purposes and cash advances for short term financing.

Before seeking financing, retailers should determine their financial position, risk appetite, and availability of options and terms in order to evaluate which financing option is best suited to their needs.