Top 5 Ways To Fund Your Startup Business In India
Considering this close to 5,400 startup business in India made a boom and the number is expected to reach over 15,000 by 2020. India is on the 3rd place behind Britain and USA in terms of the number of startups. Furthermore; in line with its global counterparts, India has its own billion dollar club when it comes to startup business in India.
Some of the startups we have known which are booming in their respective businesses are Flipkart, Hike, Snapdeal, InMobi, Hike, Ola, MuSigma, Paytm, Quikr, and Zomato. With the next $100 million funding raise, fintech startup MobiKwik too looks to join the unicorn club. If you too want to join the bandwagon of starting a new business and making a successful one; you require knowing ways to startup business in India.
Over 90% of the new businesses fail during first year of operation. Lack of capital turns out to be one of the most common reasons. Money is the bloodline of any business. The long painstaking yet exciting journey from the idea to revenue generating business needs a fuel named funds. That’s why, at almost every stage of the business, entrepreneurs find themselves asking – How do I fund my startup business in India?
Here Is The Comprehensive List Of Top 5 Funding Ways For Your Startup Business In India
1. Raise Funds By Winning Contests
There’s a recent upsurge in the increasing number of funding contests in India. These contests have tremendously helped to maximize the opportunities for fund raising. It encourages entrepreneurs with business ideas to set up their own businesses. In such competitions, you either have to build a product or prepare a business plan.
Winning these competitions can also get you some great media coverage. All you need to do is make your startup business in India project look exclusive. Hence; this improves your success to win the contests. Pitch your business idea, or talk/ explain through presentation or convey it through your business plan. It should be comprehensive enough to convince anyone that your idea is worth investing in.
Some of the happening startup business in India contests are NASSCOM’s 10000 startups, Wharton India Startup Challenge, NextBigIdea Contest, and Lets Ignite. Check out the latest startup programs & contests by browsing over the Internet.
2. Raising Funds Through Bank Loans
Normally, banks are the first place where any entrepreneur whether an established on or newbie will think to go for funding his/her business. The bank provides two kinds of financing for businesses in India. One is working capital loan, and other is funding.
Working Capital loan is the loan which is required to run one complete cycle of revenue generating operations, and the limit is usually decided by hypothecating stocks and debtors. Whereas; funding from bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is sanctioned.
Almost every bank in India offers funding to startup business in India under various programs. For instance, the leading Indian banks include names like – HDFC, ICICI, Bank Of Baroda, State Bank Of India, and Axis banks have more than 7-8 different options to offer collateral free business loans.
3. Govt Programs That Offer Startup Capital
The Government of India has launched 10,000 Crore Startup Fund in Union budget 2014-15 to improve startup ecosystem in the country. In order to boost innovative product companies, Government has launched ‘Bank Of Ideas and Innovations’ program.
Government backed ‘Pradhan Mantri Micro Units Development and Refinance Agency Limited starts with an initial corpus of Rs. 20,000 crore which extends the benefit around 10 lakhs SMEs. You are supposed to submit your business plan and once approved, the loan gets sanctioned.
You get a MUDRA Card, which is like a credit card, which you can use to purchase raw materials, other expenses etc. Shishu, Kishor and Tarun are three categories of loans available under the promising scheme. You can learn in detail about Mudra here.
Furthermore; different states also have come up different programs to fund startup business in India like Kerala State Self Entrepreneur Development Mission, Maharashtra Centre for Entrepreneurship Development, Rajasthan Startup Fest, etc to encourage small businesses.
Small Industries Development Bank Of India also offer business loans to MSME sector. If you comply with the eligibility criteria, Government grants as a funding option could be one of the best. You just need to make yourself aware of the various Government initiatives.
4. Get Angel Investment In Your Startup
Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startup business in India. They at time work in groups of networks to collectively screen the proposals before investing as well as offering mentoring or advice alongside capital.
Angel investors have helped to start up many prominent companies. This alternative form of investing generally occurs in a company’s early stages of growth, with investors expecting a up to 30% equity. They prefer to take more risks in investment for higher returns.
Angel Investment as a funding option has its shortcomings too. Angel investors invest lesser amounts than venture capitalists
5. Crowdfunding As A Funding Option
Crowdfunding is one of the newer ways of funding a startup that has been gaining lot of popularity lately. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.
An entrepreneur will pitch detailed description of his/her business on a crowd-funding platform. The participant will mention the goals of his business, plans for making a profit, how much funding he needs and for what reasons, etc. and then consumers will read about the business and invest if they like the idea.
Those giving money will make online pledges with the promise of pre-buying the product or giving a donation. Anyone can contribute money toward helping a business that they really believe in.
The best thing about crowd funding is that it generate interest hence; helping in marketing the product alongside financing. This process can cut out professional investors and brokers by putting the funds in the hands of common people.
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