Major Challenges in Fund Raising

Major Challenges in Funds Raising

Funds Raising is a major challenge for any business house to achieve the desired expansion which restricts it from growing & realizing its full potential. Though various initiatives of Govt. agencies are trying to ease the process of funds raising yet numerous challenges in Fund Raising is still exist. This blog is focused to figure-out the ways & measures to overcome these challenges.

Lack of Awareness

Despite displaying praise worthy entrepreneurial tenacity quite a few entrepreneurs do not possess financial awareness to reach at correct business decisions. Quite a few times this can lead to uneven working capital ratios & suppress credit scores. Moreover funds raising from any lender without managing tenure & pricing can lead to stress on repayment capacity resulting into block of further flow till terms of those loans are restructured.
With invent of latest technology & algorithm assessment, most of the entrepreneurs aren’t well versed with the parameters that NBFCs & Institutions are utilizing. So it is advisable to go through the terms in detail before accepting any funding proposal.

Additional Collateral & Risk appetite constraints

Conventional lending alternative mostly expect business owners to fulfill stringent eligibility criteria as well as to provide collateral. On top of it the loan processing & subsequent crediting of funds is a long & tedious process. Small business entrepreneurs usually start their business with their savings & they further stretch it out up to all of their available assets to keep their business going when their business start generating good profits.
When an entrepreneur plan for expansion due to good prospectus then he need to face twist in the form of additional collateral requirements & sometime lenders insist for additional collateral dire need of Funds resulting into running business at the verge of collapse due to short working capital.
So it is highly important to identify right mix of institutions which understand business needs quickly & have risk appetite to extend the desired funds in the form of credit line or term loans without collateral to support at the hour of need.

Compliance

In traditional borrowings, Banks usually seek recurring monthly reports which are somewhat tedious for small business houses due to lack of knowledge & lack of resources to prepare such reports. This make them ineligible for availing higher funding desired for their operations. Moreover with no assessment from credit rating, these businesses are ranked in higher risk category so Banks are reluctant to take higher exposure on them or some time imposes stricter regulations.
In such scenario, an entrepreneur should choose the different set of lenders or Banks which have capacity to lend to such risk profile to save from undue delay in execution.