Startup Funding Options in India: When you are all set to start a business, it is extremely important for you to get money to run your business successfully. This is where the capital funding picture comes in. There are several ways to raise startup capital for your business. Capital investment can be raised for any kind of business, such as MSME, large scale business, etc., However, finding ways to raise capital for a company is difficult if you are new to the market. And to help you find funding ways in India, here is a detailed page that tells you everything about it. On this page, let us discuss how to raise money for a business without a loan. Scroll down to find out more.
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How To Fund Your Start Up Business?
According to a recent study, over 94% of businesses fail in their first year of operation. This is because of a lack of funding. Thus, it is extremely important for one to raise funds before starting a business. And the various ways to raise investment for startups in India are explained below.
1. Business Self-Financing or Bootstrapping
When you start a business, self-funding is the best plan to raise funds for your business. Self-funding is otherwise known as self-financing or bootstrapping. This is because when you apply for a business loan or visit the offices to raise capital for your business, their first question will be “how much you will be investing in your business?”. Thus, if you are a first-time entrepreneur, then investing your own savings into your business is the best option. Investing in your business will help you showcase the stability of your business to other people who are keen on investing in it. Also, in the future, if you opt for a raise in capital for your existing business, the lenders will have no reason to decline, since they know how your business has been performing all these days.
Advantages of Self-Funding:
- You have flexible interest rates or no interest rates.
- Limited obstacles
- Easy access to funding
Self-Funding has the following disadvantages:
- The only disadvantage of bootstrapping or self-funding is that it works only for small-scale businesses. If you are starting a large business, then self-funding doesn’t work and you will have to find other ways to raise capital for your business.
2. Approaching Angel Investors
Investors with an abundance of money and looking to invest in new startups are known as “Angel Investors.” Angel investors not only invest in startups in India but also plan to invest across the world. The only objective of angel investors is to invest money in new startups and expect a high profit from the business. Any business owner who is willing to start a business can directly approach the angel investors in person and request funding. Also, there are many events where startup business owners are open to presenting their ideas and angel investors come in a group and choose the right person with whom they would like to do funding.
The Advantages of Angel Investing:
- Angel investors provide guidance as well as funding to entrepreneurs.
- Angel investors are prepared to take chances on company ideas since they expect a high return on investment from your startup.
Angel Investing’s Drawbacks:
- Angel investors spend less cash on startup concepts than venture capitalists.
3. Startup Venture Capital
If your product is in high demand in the market, venture capital is one of the best ways to raise funds for it. Usually, venture capital funds are managed by professionals, and this professional will have a keen eye on the business that has a great possibility of making a profit. Thus, the main objective of venture capital is to invest in a good business rather than equity.
However, when the business with which they are associated goes public or is acquired, venture capitalists withdraw and look for other opportunities.
The Advantages of Venture Capital:
- The professionals who invested in your business would monitor the success rate of the business from time to time and help with the growth of their investment.
- The officials will guide and provide the knowledge from time to time that the business owners can incorporate into their own business.
Venture Capital’s Disadvantages:
- Since venture capital investors handle a substantial portion of your business, you might not have full control of your business.
- If you are starting a small-scale business, then forget about venture capital, since they prefer only large organisations.
4. Crowdfunding Assistance
Crowdfunding is all about collecting investments from various investors through multiple social networking sites and web-based platforms. The main objective of crowdfunding is to provide funding only for business purposes. There are many online crowdfunding websites such as Ketto, Fundable, Indiegogo, Catapooolt, FuelADream, Kickstarter, Wishberry, Milaap, etc. The online crowdfunding websites will help investors raise funds for various reasons, such as social causes, charities, ideas, events, and many others. If you are looking to raise funds for the first time, then you can simply raise your capital investment through crowdfunding.
Advantages of Crowdfunding Support:
- Suitable for small-scale entrepreneurs.
- If you need only a small amount of funding, then you can go for crowdfunding.
- One can easily gain public interest in a business since you are advertising your business. Free marketing and promotion are done for your business.
Disadvantages of Crowdfunding Assistance:
- Not suitable for large-scale business.
- Due to the heavy competition, your business idea will be overlooked and rejected most of the time.
5. Funding Under Government Schemes
If you want to know the answer to the question “how to get funding for a startup from the government,” then read this section. The officials of the government of India have launched various schemes to help all the types of entrepreneurs, such as SMEs, MSMEs, SSIs, women, and many others. Any individual who wishes to raise capital for their business through a government scheme can get it done by applying for the appropriate scheme that is suitable for their business. Some of the government schemes through which one raises capital are as follows:
- Pradhan Mantri Mudra Yojana’s MUDRA loan scheme
- Start-up India
- Micro and small businesses
- Atal Innovation Mission
- Make in India
- Trade-related Entrepreneurship Assistance and Development (TREAD), etc.
The Advantages of Government Schemes:
- Based on the scheme, the officials will provide as much assistance as possible to business owners.
- There are various business schemes that are suitable for all categories, genders, and ages. So if you can, simply apply for the business loan under a scheme that fits your capacity.
Government Schemes’ Disadvantages:
- Since you are applying under the government bureaucracy, the process of inspection, approval and final distribution of funding may take a long time.
6. Apply for Bank Loans
Banks are regarded as the top priority for start-up businesses since they provide a more trustworthy and simple method of obtaining funds. Banks give finance to new businesses in two forms: term loans and working capital loans. Almost every public and private sector bank in India provides start-up financing. However, the interest rate, loan amount, and payback period given by each bank will differ.
The Advantages of Bank Loans:
- Entrepreneurs have access to large amounts of cash.
- Capital provision can accelerate the process of generating income.
Bank Loan Disadvantages:
- There is a high risk of collateral loss because collateral is an important requirement for loan approval.
Few Other Ways to Raise Startup Capital for Your Business in India
Apart from the above-explained ways, there are a few other ways with the help of which you can easily raise capital for your business. Some of the other ways with the help of which you can get an investment for your business are as follows:
- Product Pre-Sale: A great way to get revenue for your business before formally selling your items is through product pre-sale. This increases customer trust in your brand and helps you forecast demand for your product prior to its official introduction. Companies such as Apple and Samsung use this method, allowing customers to pre-order their items before they are officially released.
- Selling Assets: Selling high-value assets in your possession might efficiently function as an instant source of cash for your business.
- Credit Cards: Business credit cards are a quick way to get money. New businesses that incur significant expenses can use credit cards as long as they meet the minimum payment obligation.
Now that you have been provided with all the necessary information on how to raise startup capital for your business, If you are looking to raise funds for your business in India, then do take up the ideas presented on this page to get funding without any difficulty.
All the very best with your start-up launch 🙂
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