How to Use Committee System to Raise Capital for Your Business

committee system to raise capital

The first thing a new entrepreneur asks himself when he comes up with an appealing product idea for his new business is, “What do I do for funding?” The majority of SME entrepreneurs raise seed capital from personal savings (an initial investment to launch their business). They are prepared to seek additional funding to expand their business once it reaches its full potential.

Read: Online Committee System: Simple Way to Raising Debt

Do You Want Raise Capital For Your Business At Low Interest Rates?

Ways To Raise Capital For A Business

The traditional approaches to capital raising for new businesses are:

  • Taking out loans from banks
  • Seeking venture capital from private equity funds
  • Listing the business on the stock market through an IPO
  • Recruiting new partners who can pool their capital

All the above options have their own advantages and disadvantages. Let us discuss each of these in detail:

Loans from NBFCs or banks are the most obvious option. If you have a solid product idea and can consistently generate revenue, they might be an easy way to raise money. However, when the business is struggling, they add a significant amount of debt to the company’s finances. The debt has a significant impact on the business and frequently causes it to cease operations.

Scaling your business can be accomplished through venture capital, selling a stake to a partner, or listing on the stock market. However, they result in a loss of control over the promoters’ decision-making powers and involve a lot of procedural complexity. You would have to accommodate the wishes of the investors, who will become important stakeholders.

Read: How To Start Your Own Business- Step-By-Step Guide

How to Raise Funds for Business with Committee Platform

Let’s now take a look at Committee System, a different way to get money for your business.

Initial funding, working capital, the acquisition of assets and machinery, tax considerations, salary payments, the purchase of raw materials, and so on are all aspects of finance management for a business entity. Although the specifics of financial planning will vary depending on the nature of the business, these are common considerations for all entrepreneurs.

A typical expanding business will have a well-defined short- to medium-term expansion strategy. The organization of working capital for day-to-day operations is the goal of short-term financial planning. Planning must be completed right away for expansion objectives that span two to five years. For both short and medium term supporting, committee money is reasonable. Let us find out how.

Committee Money for working capital and short-term financial needs

Even though SMEs have a reasonably healthy order position, the majority of business surveys in the current global economic climate indicate that a working capital crunch is the primary cause of failure. The obligatory fulfillment of fixed commitments, such as salary, bill payment, loan EMI, or tax obligations, is required.

Committee platform can assist you in this situation. A committee system is a much better option for obtaining working capital than an overdraft if you are accustomed to using one. That is because the repayment you make every month only covers the interest when you avail of debt. Whereas with a committee scheme, even if you pull out the entire amount early, your monthly payments cover both the principal and interest. Thus, leaving you debt free at the end of the tenure.

You might have complete trust in an offline committee system. With technology advancements and digitalization even these age old form of committees have gone online. Money Club is India’s first digital platform which aims to make the Committee system effective, transparent, and accessible for all. All transactions are digital. Members of the club deposit funds into your bank account directly. The money does not lie with the organizer.

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Download The Money Club App For All Your Financial Needs.

Committee Funds for two- to five-year expansion plans:

You might want to think about putting a portion of your current profits into a committee scheme in order to achieve your medium-term expansion objectives in two to five years. When you require capital two years in advance, you will have access to the lump sum. You can reinvest the amount for subsequent terms in longer tenure plans.

If you keep the money and don’t withdraw it until the end of the term, it will earn a healthy return on investment of between 15 and 20 percent. You can withdraw your total money anytime during the middle of your investment tenure in the event of a financial emergency with minimal documentation while continuing to pay your monthly installments. There is no high cost in terms of interest, unlike when applying for a loan.

You can pick a committee scheme with a low monthly installment for working capital needs. And opt for a larger prize money scheme for raising capital for expansion plans.

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Let us understand with the help of an example:

Rohit wants to be an entrepreneur.

He wants to start his own online retail business where he can sell tees designed by various artists. To get started, he’ll need at least 1 lakhs to start his business. He considered going to a bank to apply for a business loan, but quickly realised that not only was the process of getting a loan approved a herculean task, but the interest rate was quite high as well.

He even considered looking into some promising government start-up schemes, but most of them required valid project reports or required him to mortgage his business property or company assets.

Rohit can participate in the online committee scheme. He only needs to contribute Rs 8,000 per month in various clubs for the next 1 year. Meanwhile, he can take part in the live auction and bid to win the lumpsum amount in the first month. This means Rohit has the potential to earn up to 95% of the committee value in a single shot! In this manner, Rohit can obtain the entire amount he requires quickly and easily. He can continue his contribution to the fund each month, as a monthly installment.

Download the Money Club App and start with an investment scheme. We will be glad to help you out with the right scheme that matches your needs.

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