How to raise funds for business in India | 8 Best Tactics

 

Do you want to start a business? You have a fantastic idea, the determination, and the assurance that you will succeed. Have you considered how much money or finance you'll need to realise your dream? or How to raise funds for business in India?

Whether the start-up is a small firm or a giant corporation, all businesses require funds to get started.

Funding provides a solid foundation for your business objectives, allowing them to extend and grow. Finding capital for a startup firm can be a difficult and time-consuming endeavour. 

However, to make things easier for you, apply for company registration online and increase your credibility. 

Also, we've created a list of key financing tactics that will assist you in obtaining funding.

 

1. Fund your Startup on Yourself

Several business start-ups rely on self-financing or personal investment as their primary source of capital. 

Even if you take out a loan or contact a venture capitalist or a government institution for funding for your start-up, they will ask you how much capital you intend to put into it. 

For first-time entrepreneurs, investing their own money is the greatest option. You can simply choose for business loans in the later phases of your business, and lenders will have no reason to deny you because they will consider the stability of your business, as it will be a low-risk element for them.

 

2. Identifying Angel Investors

Angel investors are individuals who have a surplus of capital and are interested in investing in fresh start-ups in India and throughout the world. 

When compared to loans supplied by financial institutions, the risk involved in these investments by Angel investors is larger, as Angel investors intend to invest for higher profits. Mumbai Angels, Indian Angel Network, and Hyderabad Angels are some of India's most well-known angel investors. 

These investors can be contacted directly by start-up entrepreneurs for funding assistance.

 

3. Keep an eye out for crowdfunding opportunities.

Crowdfunding is a method of raising funds from a large number of people via social media sites and web-based platforms, primarily for business purposes. 

Crowdfunding websites raise money for a variety of causes, including social causes, charity, ideas, disaster assistance, and events. 

This notion or idea aids in the raising of finances for new businesses or first-time entrepreneurs, as well as the promotion of social and cultural reasons. Kickstarter, Ketto, Catapooolt, FuelADream, Fundable, Indiegogo, Milaap, Wishberry, and others are among India's biggest crowdfunding platforms.

 

4. Make an application for a loan through a government programme.

The Indian government has launched several loan schemes aimed at assisting start-up businesses, SMEs, and MSMEs, as well as promoting rural India's socio-economic growth, women entrepreneurs, educated youth, individuals from the SC/ST category, Small Scale Industries (SSIs), villages, and people living in rural and urban areas. 

The MUDRA loan scheme under the Pradhan Mantri Mudra Yojana (PMMY), Start-up India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Stand-up India, Atal Innovation Mission, Make in India, Trade-related Entrepreneurship Assistance and Development (TREAD), and other loan schemes launched by the Indian government to assist start-up businesses.

 

5. Obtain loans from both private and public banks

For start-up businesses, banks are the first preferred method for how to raise funds for business in India, because they are more dependable and convenient. Term loans and working capital loans are two types of loans that banks offer to new businesses. 

Almost every Indian bank, both public and private, gives business loans to start-ups. The interest rate, loan amount, and repayment period offered by each bank, however, will differ.

 

6. Look for small business loans from non-banking financial institutions (NBFIs) or microfinance institutions (MFIs).

It will be tough to obtain loans from private or public sector banks if you are new to lending and do not have a financial history or credit score. 

You can receive business loans for your startup by contacting Non-Banking Financial Companies (NBFCs) and Micro Finance Institutions (MFIs) without having a credit score or financial history. 

When compared to PSU banks, the interest rates offered by NBFCS and MFIs are significantly higher.

 

7. Take advantage of business credit cards

Since the growth of start-up businesses in recent years, the use of credit cards for commercial reasons has increased. 

So, for your question of how to raise funds for business in India, you can also consider business credit cards.

If your business does not require huge sums of money in the early stages, you can utilise credit cards for transactions and clear the balance on time to prevent debt or additional interest rates paid in the form of penalties.

But, to get a business credit card, you must first get company registration online. Because your credit card won't get approval without it.

 

8. Peer-to-Peer Lending (P2P)

Peer-to-peer lending is a sort of money lending in which there are no middlemen engaged in the transaction. Lenders give money to borrowers as an investment, while borrowers receive funds to invest in their new business. 

Lenders can profit from borrowers in this procedure because the interest rate offered is higher than that of banks, NBFCS, and MFIs. The RBI regulates peer-to-peer lending institutions for the benefit of both lenders and borrowers. 

Peer-to-peer lending is a sort of loan for start-up businesses, but it is an investment for lenders.

 

Startup Stages and Best Funding Sources

Startups can obtain capital from a variety of sources. The source of finance, on the other hand, should usually correspond to the level of the startup's operations. 

Please keep in mind that gathering cash from outside sources is a lengthy process that can take up to 6 months to complete.

 

• Ideation

It is the stage in which the entrepreneur has a concept and is working to make it a reality. The quantity of money required at this point is usually minimal. 

Furthermore, there are extremely few and primarily informal avenues for acquiring financing at the early stages of a startup's lifespan.

Source of Funds: Bootstrapping/Self-financing, Friends & Family, Business Plan/Pitching Events

• Validation

At this stage, a startup has a prototype ready and wants to validate the product/prospective service's demand. This is known as a 'Proof of Concept (POC),' and it is followed by a big market launch.

Source of Funds: Incubators, Government Loan Schemes, Angel Investors, Crowdfunding

• Early Traction

The startup's products or services have been released in the market at this level. At this point, key performance indicators like client base,

revenue and app downloads become crucial.

Source of Funds: Venture Capital Funds, Banks/Non-Banking Financial Companies (NBFCs), Venture Debt Funds

• Scaling

The startup is currently seeing rapid market growth and increasing revenues.

Source of Funds: Venture Capital Funds, Private Equity/Investment Firms