At an initial stage, it is always advisable that you invest money from your own pocket. Bootstrap is one of the best options if you have sufficient funds available to you. If not then you can borrow from your family or relatives and friends. However, there are some serious shortcomings to the latter option. You might risk losing your relationship when you borrow money from your close relatives and it’s a proven fact that money has the power to ruin everything.
In a case where you are just starting up, where you do not have enough funds to dig into and you do not want to risk borrowing from your relatives or friends. In such a case, borrowing a start-up loan for business from Non-Banking Financial Companies (NBFCs) is the best option. As an engineer, you are filled with ideas and propositions about how you want things to be, however, lack of funds thwarts forecasting and plans. But you should not get demotivated as you do have choices in your hands and you can resort to them as and when needed.
Apart from flexible start-up loans provided by the NBFCs, there is also an option to invest in an equity so that you can gather a lump sum amount by making the right investment. There are various lenders who do not provide sufficient support for the start-up funding except NBFCs. But keep NBFCs as your realistic option, you can look forward to venturing into the equity world. Both these forms of borrowing have their own pros and cons, let us consider how loans are better than equity when it comes to your start-up.
Process: The process of obtaining a start-up loan is pretty simple to understand. The complexities aren’t there at all as compared to equity funds which are very complicated to understand.
Flexibility: The lenders providing you with the start-up Business Loans will not ponder you with questions. They make it flexible for you to work as per your wish. All you need to take care of is timely repayment. However, that is not the case with equity as you are accountable.
Profit Sharing: It is just the initial borrowing that you take from the lender which has to be repaid. Apart from that, once your business starts to earn a profit, you do not have to share that with anyone. In equity though, you will have to share the dividend based on the percentage decided.
Involvement: The involvement of the lender in the business is only till you repay the loan, that too they are just entitled to receive timely repayments. Equity funds enable the lenders to be a part of the firm for as long as they want.
Charges: As far as the processing, formalities and legal charges are concerned, the lenders who are providing you start-up loans charge a minimum fee than that of the equity ones. The charges of formalities and legal paperwork require an entrepreneur to spend a lot.
Availability: As for the start-up loan provided by the NBFCs, the availability of the loan is much more than that of equity funds. Under equity funds, only a few investors would be interested in your plan. As an engineer looking forward to obtaining engineer loans, the lenders step out of the way to help you achieve your business goals.
These were the few points that make it clear as to how Business Loans for Engineers are better than equity funds. The drawbacks in business loans are next to none as compared to that of equity borrowing. However, it is important to know that start-ups are different and so is the approach of the lender. And for that very reason, Engineer loans are the most suitable option for you.