Whenever you have thought of starting a business, you face financial constraints or capital requirements. This is not only you, most of us face the same situation and drop the plan of starting a business. Funding for a startup or new business is an essential requirement.
Whether you’re launching a tech startup, a manufacturing venture, or a service-based company, securing funding is crucial for growth and sustainability. Hence, In this comprehensive guide, I will explore various methods through which you can secure funding your new business in India, along with government schemes, grants, loans, and corporate platforms.
Methods to fund business
1. Bootstrapping: It means funding your business with your own money or capital. You make profit and re-invest in your business to grow more. This allows you to have full control on your business without getting investment or any investors. But, there are limitations too like low capital and reinvestment of profit remains low, expansion of business is also low which results in slow growth of the business.
2. Angel Investment: Bringing investors for your business in return you give them equity or whatever terms between you and them. Angel investors are like your known, or high income individuals who are looking to invest in businesses, or individuals who have already achieved in their business and invest in yours to increase investment. They are usually your known ones.
3. High Networth Individuals: offering equity of your company in return you get funding for your startup or business. High networth individuals are like Shark Tank judges who are willing to invest their money into business with the purpose to earn more with their extra money.
4. Debt Financing: If you don’t want to dilute your equity, without losing control over business and are willing to raise some capital, Debt financing can be one of the best sources for startups seeking capital to fund the business operations and growth. It involves borrowing money from external sources like angel investors, banks, financial institutions, venture capitals, high networth individuals, with the promise of repayment, typically with interest, over a specified period. In this, interest rates are usually high and terms and period of repayment are decided between you and the lender.
5. Startup Accelerators: Startup accelerators are programs that help early stage startups to accelerate their growth within a fixed time. These programs offer startups related curriculum and mentorship to entrepreneurs that can help them in structuring their business models, scale products or services to right customers or consumers. It also helps in pitching their businesses before potential investors through the networks.
6. Startup Incubators: It helps in building an idea into a startup by presenting to potential investors. It is similar to Startup Accelerators but it helps startup or business idea for extended period of time and offer ongoing support and resources to startups so that they can develop their businesses
Government Schemes and Grants
There are various Government schemes initiated after 2014 and help new micro and small businesses and startups with funding.
Governments usually provide fundings in the form of Grants. A grant is an award, usually financial, given by an entity to a company to facilitate a goal or incentivize performance. There is no component of repayment of the invested funds.
a. Startup India Scheme
The Startup India initiative by the Indian government aims to push innovation and entrepreneurship. Here are some key features:
- Any entity registered as a private limited company, partnership firm, or LLP can apply.
- Tax exemptions, self-certification compliance, and access to a network of incubators and accelerators.
- Can apply directly on official portal to get DPIIT recognition to avail benefit of compliance and tax exemptions. Full details – https://www.startupindia.gov.in/content/sih/en/startup-scheme.html
b. Startup India Seed Fund Scheme
The startup India seed fund are offered by the Government of India based on the submissions and presentations by the startups:
- Seed Fund will be disbursed to selected startups through eligible incubators across India.
- Need to get DPIIT recognition under Startup India Scheme.
- Up to Rs. 20 Lakhs as grant for validation of Proof of Concept, or prototype development, or product trials. The grant shall be disbursed in milestone-based installments. These milestones can be related to development of prototype, product testing, building a product ready for market launch, etc.
- Up to Rs. 50 Lakhs of investment for market entry, commercialization, or scaling up through convertible debentures or debt or debt-linked instruments.
- More details on https://seedfund.startupindia.gov.in/faq
c. Pradhan Mantri Mudra Yojana (PMMY)
You can get a collateral free loan to start your business as an MSME, the only requirement is you need to obtain an MSME registration certificate. It covers manufacturing, processing, trading, and allied services. Launched in April 2015, PMMY aims to promote entrepreneurship and generate employment opportunities by offering collateral-free loans to individuals, particularly those from marginalized and underprivileged sections of society.
- Purpose: To meet working capital needs, purchase equipment, or expand operations.
- Eligibility: Micro and small enterprises certificate.
- Features: Three categories—Shishu (up to ₹50,000), Kishore (₹50,001 to ₹5 lakhs), and Tarun (₹5 lakhs to ₹10 lakhs).
d. Prime Minister’s Employment Generation Programme (PMEGP)
This scheme is implemented via KVIC (Khadi and Village Industries Commission). The maximum cost of the project/unit admissible in the manufacturing sector is ₹ 25 lakhs and in the business/service sector, it is ₹ 10 lakhs. You can apply directly through the online portal – kviconline.gov.in.
You can also choose what you can do. There are plenty of project report of different businesses furnished by the KVIC- click here to learn
e. The Small Industries Development Bank of India (SIDBI)
It offers financial assistance to startups through its Startup Mitra platform. It connects entrepreneurs with authorized lenders and provides guidance on loan applications.
Corporate Platforms
a. Angel Investors and Venture Capitalists (VCs)
Seek investment from angel investors or VCs who believe in your business idea. Prepare a compelling pitch and showcase your growth potential.
b. Crowdfunding
Platforms like Kickstarter and Indiegogo allow you to raise funds from a large number of people.
Present your project or product effectively to attract backers.
Leveraging Social Media
a. LinkedIn
Connect with industry professionals, potential investors, and mentors. Share your business updates, future plans, goals, vision and achievements.
b. Twitter and Instagram
Use these platforms to create brand awareness and engage with your audience. Share success stories, behind-the-scenes glimpses, and product launches. This will allow business to come in the limelight and you may be contacted with investors. .
Conclusion
Financial Planning and Projections: Emphasize the importance of creating a sound financial plan with realistic projections to secure funding and manage resources effectively.
Networking and Building Relationships: Highlight the value of networking with potential investors, mentors, and industry experts to gain valuable insights and build trust.
Securing funding for your new business involves a mix of research, networking, and persistence. Explore government schemes, tap into loans, and leverage corporate platforms. Remember, informed decisions lead to successful ventures. Best of luck on your entrepreneurial journey!
Read More: The Ultimate Guide to Start Online Tutoring in India or Step by Step Process: Start Notebook Business in India
